Ethics and Investing You are an accountant for ABC Corporation. The president of

Question

Ethics and Investing You are an accountant for ABC Corporation. The president of the company calls you into her office and says, "I want to ask you about two issues. First, we e shares of Company X, which are currently worth $1 million even though when they originally cost us $400,000. But I don't want to sell them because the company seems to be all the time. Or we could sell the shares worth $1 million, but they cost us $1.5 million, and I hate to admit that we made such a big mistake. And then there's that loss. I don't want to report that. I am going to use the $1 million to buy about 20% of the shares of Company M, but I seem to remember that there is getting better me accounting rule might affect how much we buy. I was also wondering that into a large ownership position in the future. Let me know what you think." You are aware that Company M is a new company that is not yet listed on the stock market, has been making losses, and is expected to continue making losses for a few more years. about buying some of Company M's convertible preferred stock so we can convert Required: From financial reporting and ethical perspectives, discuss the issues raised by this situation

Explanation / Answer

First thing that you have not reported the losses incurred from investment. You have to report it in financial statements.

Hold the shares which were originally cost $400,000 as it is expected to grow in future instead of selling them to invest in a company that is production losses and expected to continue the same.

Dispone of the investment of $150,000 as there is no expectation to recover profit from it and invest it in a better proposal.

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