For the first nine months of 2006 the Anderson Company isexperiencing significan

For the first nine months of 2006 the Anderson Company isexperiencing significantly lower earnings than it had forecast dueto unidentified reasons. Management begins to search for ways toincrease earnings during the last quarter of the year and therebycalm the fears of their stakeholders.The Controller is called into a meeting of the top management teamand submits the following plan:Anderson should issue $1000000 of bonds and use the proceeds toacquire the outstanding 15 year 10 percent bonds of itssubsidiary.The subsidiary bonds currently sell at 90.Five years ago the subsidiary bonds were issued at a premium thattotaled $75000.Andersons borrowing rate is 12 percent.This transaction creates a $150000 gain that can be reported in2006 thus bringing earnings up to the forecast amount.Prepare a brief essay that evaluates the validity both practicallyand ethically of the controllers plan.