Company owner Abel Terrio has reviewed the 2011 financialstatements you prepared

Company owner Abel Terrio has reviewed the 2011 financialstatements you prepared for Jackson Company as the accountant andquestions the $6000 loss reported on the sale of its investment inBlackhawk Co. common stock.Jackson acquired 50000 shares of Blackhawks common stock onDecember 31 2009 at a cost of $500000. This stock purchaserepresented a 40% interest in Blackhawk. The 2010 income statementreported that earnings from all investments were $126000.On January 3 2011 Jackson Company sold the Blackhawk stock for$575000. Blackhawk did not pay any dividends during 2010 butreported a net income of $202500 for that year. Terrio believesthat because the Blackhawk stock purchase price was $500000 andwas sold for $575000 the 2011 income statement should report a$75000 gain on the sale.Required:Draft a one-half page memorandum (at least 2 paragraphs) to Terrioexplaining why the $6000 loss on sale of Blackhawk stockis