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

question 8

Multiple Choice

Company S is a 100%-owned subsidiary of Company P.On January 1, 2019, Company S has $200,000 of 8% face rate bonds outstanding, which were issued at face value.The bonds had 5 years to maturity on January 1, 2019.Premiums or discounts would be amortized on a straight-line basis.On that date, Company P purchased the bonds for $198,000.The amount on the consolidated balance sheet relative to the debt is:

• A)​bonds payable $200,000.
• B)​bonds payable $200,000, discount $2,000.
• C)​bonds payable $200,000, discount $1,600.
• D)​The bonds do not appear on the consolidated balance sheet.

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Definitions:

TSX

The Toronto Stock Exchange, one of the largest stock exchanges in the world, based in Canada.

OTC

Over-the-counter; referring to securities traded in some context other than on a formal exchange.

Proprietorship

A business entity owned and operated by a single individual, with no distinction between the business and the owner.

Personal Liability

The responsibility of individuals to repay debt or fulfill obligations from their own assets, distinct from corporate or shared liabilities.