Gill Ltd Is the Wholly Owned Subsidiary of Basaraba Ltd

question 2

Multiple Choice

Gill Ltd. is the wholly owned subsidiary of Basaraba 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. How should the gain be shown?

• A)It will appear on Basaraba's separate-entity statement of comprehensive income only.
• B)It will appear on both Basaraba's separate-entity and consolidated statements of comprehensive income.
• C)It will appear on Basaraba's consolidated statement of comprehensive income only.
• D)It will be added to the value of the bonds payable on Basaraba's statement of financial position.

---

Definitions:

Restrictive Indorsement

An indorsement in which words have been added to the signature of the indorser that specify the purpose of the indorsement or the use to be made of the commercial paper, such as “for deposit only.”

Dishonored

Refers to a failure in fulfilling an obligation, such as a check not being paid because of insufficient funds.

Draft

A preliminary version of a document or plan, subject to revisions and improvements.