Bus 1 - been reported with further no interest being...

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Question In question 4(see note), why is the consolidation process simpler if the bonds had been acquired directly from the subsidiary than from a third party? (NOTE: 4. A parent company acquires from a third party bonds that had been issued originally by one of its subsidiaries. What accounting problems are created by this purchase?) Answer As the bonds had been purchased from the outside party, acquisition price has been possibly to vary from book value of bonds as it has been found in subsidiary’s records. Difference creates accounting the problems while handling the inter-company transaction. From the perspective of consolidated, bonds had been retired, the gain and the loss must have
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Unformatted text preview: been reported with further no interest being recorded as. Actually every company may continue in maintaining such bonds in its individual financial records. And also, however the discounts or the premiums have been possibly to be present, both of those account balances, and also interest income or the expense may change from the period to period due to the amortization. For the purposes of reporting, all the individual accounts should have been eliminated with a gain or loss which has been reported so that events have been shown from a point of view of a consolidated entity....
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