Company S Is a 100%-Owned Subsidiary of Company P

question 47

Multiple Choice

Company S is a 100%-owned subsidiary of Company P.Company P purchased, at a premium, Company S bonds that are outstanding and have a remaining discount.Consolidation theory takes the position that:

• A)​interest expense should be adjusted to reflect the market value of the bonds on the date of Company P's purchase.
• B)​the debt has been retired at a loss.
• C)​the debt is outstanding but should be shown at face value.
• D)​the gain or loss on retirement should be allocated over the remaining life of the bonds.

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