Which of the Following Methods of Allocating the Gain or Loss

question 29

Multiple Choice

Which of the following methods of allocating the gain or loss on an intercompany bond retirement is the soundest conceptually?

• A) The gain (loss) is allocated to the company that issued the bonds.
• B) The gain (loss) is allocated to the company that purchased the bonds.
• C) The gain (loss) is allocated to the parent company.
• D) The gain (loss) is allocated between the purchasing and issuing companies.

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Definitions:

Accounts Receivable

Financial obligations customers have towards a business for utilized or received goods and services that remain unpaid.

Creditworthy Customers

Clients deemed capable of paying back credit extended to them due to their solid financial standing.

Prompt Payment

The act of settling a transaction or invoice on or before the due date.

Financing Cost

The interest and other costs incurred by a company to borrow funds or access other forms of financing.