ADVANCED ACCOUNTING W/ACCESS >CUSTOM<
14th Edition
ISBN: 9781307594683
Author: Hoyle
Publisher: MCG/CREATE
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Chapter 6, Problem 4Q
To determine
Identify the accounting problems which are created by this purchase of bonds.
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When a company acquires an affiliated company’s debt instruments from a third party, how is the gain or loss on extinguishment of the debt calculated? When should this balance be recognized?
A parent business purchases bonds on the open market that had previously been issued by a subsidiary of the parent firm. Consequently, the price paid by the parent is less than the amount of bonds that are currently recorded on the subsid- iary's books. When it comes to reporting the difference between the price paid and the carrying amount of the bonds, how should the parent report it on its consolidated financial statements?
A parent company acquires from a third party bonds that had been issued originally by one of its subsidiaries. Why is the consolidation process simpler if the bonds had been acquired directly from the subsidiary than from a third party?
Chapter 6 Solutions
ADVANCED ACCOUNTING W/ACCESS >CUSTOM<
Ch. 6 - Prob. 1QCh. 6 - Prob. 2QCh. 6 - When is a firm required to consolidate the...Ch. 6 - Prob. 4QCh. 6 - Prob. 5QCh. 6 - Prob. 6QCh. 6 - Prob. 7QCh. 6 - Prob. 8QCh. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - How do noncontrolling interest balances affect the...Ch. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - Prob. 17QCh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Problems 7 and 8 are based on the following...Ch. 6 - Prob. 8PCh. 6 - Bens man Corporation is computing EPS. One of its...Ch. 6 - Prob. 10PCh. 6 - Prob. 11PCh. 6 - Prob. 12PCh. 6 - Prob. 13PCh. 6 - Prob. 14PCh. 6 - Prob. 18PCh. 6 - Prob. 19PCh. 6 - Prob. 37PCh. 6 - Prob. 38PCh. 6 - Prob. 39PCh. 6 - Prob. 40PCh. 6 - Prob. 41PCh. 6 - Prob. 42P
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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.Similar questions
- What is a noncontrolling interest? Select one: A. A component of debt representing amounts owed to a subset of investors B. Amounts distributed to investors that own less than a controlling interest C. The portion of a subsidiary’s net assets not owned by the parent-company D. An amount equal to investor contributions less dividends distributedarrow_forwardWhy would a company wish to reduce its bond indebtednessbefore its bonds reach maturity? Indicate how thiscan be done and the correct accounting treatment forsuch a transaction.arrow_forwardA 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? As a loss on retirement of the bonds. As a gain on retirement of the bonds. As an increase to interest expense over the remaining life of the bonds. Because the bonds now represent intra-entity debt, the difference is not reported.arrow_forward
- The motivation of a parent company to purchase the outstanding bonds of a subsidiary could be to: a. replace the existing debt with new debt at a lower interest rate. b. reduce the parent company's acquisition price for the subsidiary. c. increase the parent company's ownership percentage in the subsidiary. d. create interest revenue to offset interest expense in future income statements.arrow_forwardWhich of the following is correct regarding the classification of investment in debt instruments as financial asset at fair value through OCI? a. This classification is not allowed for investment in debt instruments. b. An entity may make an irrevocable election to classify investment in a debt instrument that is not ‘held for trading’ as such. c. In order to be classified as such, a debt instrument needs to both have simple principal and interest cash flows and be held in a business model in which both holding and selling financial assets are integral to meeting management’s objectives. d. All of the above.arrow_forwardExplain how a non-consolidated subsidiary can be aform of off-balance-sheet financing.arrow_forward
- Why do certain corporations disclose non-GAAP financial measures?arrow_forwardIn question (4), why is the consolidation process simpler if the bonds had been acquired directly from the subsidiary than from a third party?arrow_forwardWhich of the following is false? A. Under PFRS 9, the basis of carrying investments in debt securities as FVPL, FVOCI, or at amortized cost, is the entity’s business model. B. Under PFRS 9, an investment in equity securities not held for trading is automatically accounted for as FVOCI. C. Reclassification of investment in equity securities under PFRS 9 is not allowed. D. Under PFRS 9, reclassification of investment in debt securities is allowed. Or none of the choices?arrow_forward
- Which of the following is characteristic of liabilities ratherthan of equity? (More than one answer may be correct.)a. The obligation matures.b. Interest paid to the provider of the capital is deductiblein the determination of taxable income.c. The capital providers’ claims are residual in the eventof liquidation of the business. d. The capital providers normally have the right to exer-cise control over business operations.arrow_forwardHow does a corporations debt differ from its equityarrow_forwardIn every corporate liquidation, which type of credits will not share from the free assets of the corporation? * a. Unsecured claims without priority b. Partially secured claims c. Fully secured claims d. Unsecured claims with priorityarrow_forward
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