
Concept explainers
Bonds of affiliate purchased from non-affiliate: When an affiliate of issuer later acquires bonds form unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by debtor. Acquisition of an affiliate’s bonds by another company with in affiliated entities is referred as constructive retirement. Although bonds are not actually retired.
When constructive retirement occurs the consolidated income statement reports gain or loss based on difference between carrying value and purchase price paid by affiliate to acquire it. And it is not reported in consolidated
To explain : what will be the effect on consolidated net income when the parent sell the bonds. When parents purchases subsidiary bonds directly from it and later sell the bonds to non-affiliate.

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Chapter 8 Solutions
Advanced Financial Accounting
- Answerarrow_forwardI am trying to find the accurate solution to this general accounting problem with appropriate explanations.arrow_forwardDavis Company reported an increase of $350,000 in its accounts receivable during the year 2023. The company's statement of cash flows for 2023 reported $980,000 of cash received from customers. What amount of net sales must Davis have recorded in 2023?arrow_forward
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- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
