A Subsidiary has issued to public bonds with a total face-value of $200,000. The carrying value for the bonds at year end is $230,000. Parent purchased these bonds from market for $190,000.

1. Should a gain/loss be recognized on acquisition of these bonds in consolidated financial statement? Explain
2. What is the conceptually superior way to allocate any gain/loss to Subsidiary and/or Parent? Explain.
3. Assume Parent sold inventory to Subsidiary for $100,000 selling price. This sale resulted in a profit of $30,000 for Parent. Assume parents effective tax rate is 30%. Should the $30,000 "profit" be removed from the consolidated statement of earnings in the year? Explain in detail.