A Company Wants to Open a Branch in a Foreign

question 55

Multiple Choice

A company wants to open a branch in a foreign country but discovers it would have to bribe government officials to get a permit to obtain the materials necessary to build its headquarters.Which of the following is an example of an ethical response?

• A)Paying the bribe because the company's first obligation is to its shareholders.
• B)Not paying the bribe and convincing a local company to illegally sell materials to them,since demanding bribes is unethical behavior.
• C)Paying the bribe because it is customary in the country where the business is to be constructed.
• D)Paying the bribe because the company only has to comply with the community standards in the community where it will be operating.
• E)Not paying the bribe and bringing in outside materials from a foreign country to complete the construction.

---

Definitions:

Consolidated Balance Sheet

A financial statement that aggregates the financial position of a parent company and its subsidiaries, presenting it as one single entity.

Consolidation Elimination

The process of removing internal transactions and balances between entities within a single group to prepare consolidated financial statements.

Equity Method

An accounting technique used to record investments in affiliate companies where the investor has significant influence but not full control, typically between 20% and 50% ownership.

Subsidiary's Income

The earnings generated by a company that is more than 50% owned by another company, referred to as the parent company.