A parent company buys bonds on the open market that had been previously issued by its subsidiary. The price paid by the parent is less than the carrying amount of the bonds on the subsidiary’s records. How should the parent report the difference between the price paid and the carrying amount of the bonds on its consolidated financial statements?a. As a loss on retirement of the bonds.b. As a gain on retirement of the bonds.c. As an increase to interest expense over the remaining life of the bonds.d. Because the bonds now represent intra-entity debt, the difference is not reported.
A parent company buys bonds on the open market that had been previously issued by its subsidiary. The price paid by the parent is less than the carrying amount of the bonds on the subsidiary’s records. How should the parent report the difference between the price paid and the carrying amount of the bonds on its consolidated financial statements?a. As a loss on retirement of the bonds.b. As a gain on retirement of the bonds.c. As an increase to interest expense over the remaining life of the bonds.d. Because the bonds now represent intra-entity debt, the difference is not reported.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
A parent company buys bonds on the open market that had been previously issued by its subsidiary. The price paid by the parent is less than the carrying amount of the bonds on the subsidiary’s records. How should the parent report the difference between the price paid and the carrying amount of the bonds on its consolidated financial statements?
a. As a loss on retirement of the bonds.
b. As a gain on retirement of the bonds.
c. As an increase to interest expense over the remaining life of the bonds.
d. Because the bonds now represent intra-entity debt, the difference is not reported.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education