Basaraba Ltd

question 6

Multiple Choice

Basaraba Ltd.owns 75% of the outstanding common shares of Gill Ltd.Gill purchased all of Basaraba's outstanding bond issue on the open market at a discount.The bonds have an unamortized premium attached.This transaction,in effect,retires the bond and results in a gain.Under the par-value approach to dealing with a gain on elimination of intercompany bond holdings,which of the following statements is true?

• A)The gain would be assigned to Basaraba.
• B)The gain would be assigned to Gill.
• C)The gain is assigned partially to Basaraba and partially to Gill.
• D)The gain is eliminated on consolidation.

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