On May 31, 2005, Patrick Corporation acquired at 100, $500,000 face amount of Stear Company's 10-year, 12%, convertible bonds due May 31, 2010. The bonds were convertible to 50,000 shares of Stear's voting common stock ($1 par), of which 40,000 shares were issued and outstanding on May 31, 2005. The controller of Patrick, who also is one of three Patrick officers who serve on the five-member board of directors of Stear, proposes to issue consolidated financial statements for Patrick Corporation and Stear Company on May 31, 2005.

 

Instructions

 

·        Do you agree with the Patrick controller's proposal? Explain.