A Subsidiary Issues Bonds

question 45

Essay

A subsidiary issues bonds.The parent can then acquire the bonds either directly from the subsidiary or from a nonaffiliate that had originally acquired the subsidiary's bonds.
Required:
a)Discuss the parent's accounting as it relates to the preparation of consolidated financial statements,for their acquisition of the bonds:
1.from the nonaffiliate.
2.directly from the subsidiary.
b)Why does it matter who the bonds are acquired from?

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Definitions:

Net Investment

The total amount spent by a company or economy on capital assets, minus depreciation.

Autonomous Consumption

Consumption expenditure that occurs when income levels are zero, reflecting basic survival expenses.

International Oil Price

The cost per barrel of crude oil on the global market, influenced by supply and demand, geopolitical events, and other factors.

Adverse Supply Shock

An unexpected event that suddenly decreases the supply of a commodity or service, leading to increased prices and reduced output.