I recently became the controller of Pair Corporation, a manufacturing company that started a program to expand through business groups. On February 1, 2020, two weeks before your appointment as an observer, the pair completed the acquisition of 85% of the common stock owed to Sole Company for $ 225,000 in cash, including out-of-pocket costs. You are engaging in a discussion with the Chief Accountant at Pair regarding the appropriate accounting method for the spouse's interest in the operating results of the individual firm. The chief accountant strongly supports the cost method of accounting, and provides the following arguments: 1. The cost method recognizes that spouse and sole are separate legal entities. 2. The existence of a non-controlling interest of 15% in the subsidiary requires confirmation of the legal separation between the two companies. 3. The parent company recognizes revenue under the cost method only when the subsidiary declares a dividend. This dividend income is consistent with the revenue recognition principle of financial accounting. Calculating investment income recorded by the equity method does not fit the definition of the revenue earned. 4. The use of the equity accounting method may lead to the husband announcing dividends to his shareholders from the "paper" retained earnings of the one person. 5. The cost method is consistent with other aspects of historical cost accounting, because worksheet exclusions, rather than journal entries in ledger accounts, are used to recognize amortization of differences between current fair values and the carrying amounts of individual identifiable assets. Required Prepare a response to each of the chief accountant's arguments. 2