Company a Owns All of the Outstanding Common Voting Shares

question 6

Essay

Company A owns all of the outstanding common voting shares of Company B,which is said to have 500,000 shares.However,Company B's bondholders have a conversion option,which,if exercised would be convertible to 600,000 voting shares.50% of Company B's current Board Members are Company A Executives.How should Company A account for its investment in Company B?

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Definitions:

Instantaneous Communication

The exchange of information that occurs immediately without noticeable delay.

Quantum Meruit

A legal principle allowing one to recover reasonable value of services rendered when no contract exists or when a contract is unenforceable.

Gratuitous Promise

A promise made without expecting anything in return, lacking the legal enforceability of a contract due to the absence of consideration.

Binding Contract

An agreement that is legally enforceable in a court of law, holding parties to their promises.