Parent Computer Corporation acquired significant influence over Child Computer Company on January 2 by purchasing 20 percent of its outstanding stock for $100 million.Parent attributes the entire excess of cost over book value acquired to a patent, which it amortizes over 10 years.Child Computer had earnings of $100 million and declared dividends of $30 million during the year.The accounts receivable of Parent Computer Corporation at December 31 included $600,000 due from Child Computer.Parent Computer Corporation accounts for its investment in Child Computer using the equity method.Parent Computer Corporation considers reducing its ownership from 20 percent to 19.5 percent so that it no longer has to use the equity method.Comment on the ethical implications of this possibility.

Question

Quizplus · Accepted Answer

The Answer of Parent Computer Corporation acquired significant influence over Child Computer Company on January 2 by purchasing 20 percent of its outstanding stock for $100 million.Parent attributes the entire excess of cost over book value acquired to a patent, which it amortizes over 10 years.Child Computer had earnings of $100 million and declared dividends of $30 million during the year.The accounts receivable of Parent Computer Corporation at December 31 included $600,000 due from Child Computer.Parent Computer Corporation accounts for its investment in Child Computer using the equity method.Parent Computer Corporation considers reducing its ownership from 20 percent to 19.5 percent so that it no longer has to use the equity method.Comment on the ethical implications of this possibility.

Parent Computer Corporation Acquired Significant Influence Over Child Computer Company