
Concept explainers
Introduction: When an affiliate of the issuer later acquires bonds from an 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 the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.
When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated
The worksheet consolidation entries as of December 31, 20X4, to remove the effects of Inter Corporation bond ownership

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Chapter 8 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
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