Regency Corp

question 68

Multiple Choice

Regency Corp. recently acquired $500,000 of the bonds of Safire Co., one of its subsidiaries, paying more than the carrying value of the bonds. According to the most practical view of this intra-entity transaction, to whom should the loss be attributed?

• A) To Safire because the bonds were issued by Safire.
• B) The loss should be allocated between Safire and Regency based on the purchase price and the original face value of the debt.
• C) The loss should be amortized over the life of the bonds and need not be attributed to either party.
• D) The loss should be deferred until it can be determined to whom the attribution can be made.
• E) To Regency because Regency is the controlling party in the business combination.

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Definitions:

Abilene Paradox

A situation where a group collectively decides on a course of action that is counter to the preferences of many, if not all, of the members of the group.

Groupthink

A psychological phenomenon where the desire for harmony in a decision-making group overrides a realistic appraisal of alternatives.

Ordering a Pizza

The act of requesting a pizza from a restaurant or food service, typically involving the selection of specific toppings, size, and delivery or pickup options.

Lessen Groupthink

The process of reducing the tendency of people in a group to conform to a prevailing point of view without critical reasoning or evaluation.