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5. Poncho Company currently owns 100% of the outstanding common voting shares of Sombrero Inc., which has 1,000.000 shares outstanding. Sombrero has one major bondholder

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5. Poncho Company currently owns 100% of the outstanding common voting shares of Sombrero Inc., which has 1,000.000 shares outstanding. Sombrero has one major bondholder (Mr. Botas Inc.) whose Sombrero inc. bonds have a conversion option, which, if exercised would be convertible to 900,000 voting shares. Required: a) Does Poncho have control over Sombrero? Briefly support your answer. b) How should Poncho account for its investment in Sombrero? (2 marks)

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