Parent Corporation Acquired Some of Its Subsidiary's Bonds on the Open

question 74

Essay

Parent Corporation acquired some of its subsidiary's bonds on the open bond market, paying a price $40,000 higher than the bonds' carrying value. How should the difference between the purchase price and the carrying value be accounted for?

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Definitions:

Step-down Method

An allocation technique used in accounting to distribute overhead costs among various cost centers.

Personnel Department

A division within a company that manages human resources and employee-related matters.

Number Of Employees

The aggregate number of people employed by a company, encompassing both full-time and part-time employees.

Direct Method

A costing method that assigns service departments' costs directly to production departments without going through multiple allocations.