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

question 47

Multiple Choice

Company S is a 100%-owned subsidiary of Company P.Company P purchased, at a premium, Company S bonds that are outstanding and have a remaining discount.Consolidation theory takes the position that:

• A)​interest expense should be adjusted to reflect the market value of the bonds on the date of Company P's purchase.
• B)​the debt has been retired at a loss.
• C)​the debt is outstanding but should be shown at face value.
• D)​the gain or loss on retirement should be allocated over the remaining life of the bonds.

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Definitions:

Spoils System

The spoils system is a political practice where a political party, after winning an election, gives government jobs to its supporters, friends, and relatives as a reward for working toward victory, rather than for their expertise.

Civil Service Protections

Safeguards for government employees that ensure stability, fairness in hiring and firing, and protection from political pressures.

Hatch Act

A U.S. federal law enacted in 1939 that restricts the political activities of federal employees to ensure a nonpartisan federal workforce.

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Organized efforts to influence the decision-making process within a specific group, often related to elections.