You are an accountant for Davenport Enterprises. The CEO, Richard Crane calls you into his office and says, "I want to ask you about two issues. First, we need to sell one of our investments to raise $3 million because I am considering a better investment. We could sell the bonds of Victoria Inc., which are currently worth $3 million even though they have an amortized cost basis of $2,850,000. But I don't want to sell them because I like the steady stream of cash flow we get related to the interest. Or we could sell the underperforming bonds in Jackson, Corp. These bonds are also worth $3 million, but we acquired them at $3,600,000. I hate to admit we made such a big mistake, and if they can somehow avoid bankruptcy, we may be able to recover our original investment. And then there's that loss. I don't want to report that. Second, I am going to use the $3 million to buy about 20% of the shares of Kehoe Company, but I seem to remember that there is some accounting rule that may affect how much we buy. I was also wondering about buying some of Kehoe Company's convertible preferred stock so we can convert that into a large ownership position in the future. Let me know what you think." You are aware that Kehoe Company is a new company that is not yet listed on the stock market, has been making losses, and is expected to continue making losses for a few more years. Required: You are to prepare a memo addressed to Richard Crane, CEO in which you outline the issues raised by this situation from financial reporting and ethical perspectives. - Financial reporting perspective should include the proper accounting treatment (reporting) of the investment for each course of action and supported by appropriate authoritative citation (should be using the FASB Codification). - Ethical perspective should include the ethical issues faced by the company, major stakeholders involved and how the stakeholders would be affected by the course of action and what you believe would be the best course of action, You are an accountant for Davenport Enterprises. The CEO, Richard Crane calls you into his office and says, "I want to ask you about two issues. First, we need to sell one of our investments to raise $3 million because I am considering a better investment. We could sell the bonds of Victoria Inc., which are currently worth $3 million even though they have an amortized cost basis of $2,850,000. But I don't want to sell them because I like the steady stream of cash flow we get related to the interest. Or we could sell the underperforming bonds in Jackson, Corp. These bonds are also worth $3 million, but we acquired them at $3,600,000. I hate to admit we made such a big mistake, and if they can somehow avoid bankruptcy, we may be able to recover our original investment. And then there's that loss. I don't want to report that. Second, I am going to use the $3 million to buy about 20% of the shares of Kehoe Company, but I seem to remember that there is some accounting rule that may affect how much we buy. I was also wondering about buying some of Kehoe Company's convertible preferred stock so we can convert that into a large ownership position in the future. Let me know what you think." You are aware that Kehoe Company is a new company that is not yet listed on the stock market, has been making losses, and is expected to continue making losses for a few more years. Required: You are to prepare a memo addressed to Richard Crane, CEO in which you outline the issues raised by this situation from financial reporting and ethical perspectives. - Financial reporting perspective should include the proper accounting treatment (reporting) of the investment for each course of action and supported by appropriate authoritative citation (should be using the FASB Codification). - Ethical perspective should include the ethical issues faced by the company, major stakeholders involved and how the stakeholders would be affected by the course of action and what you believe would be the best course of action