1. Describe the concepts relative to intercompany debt transfers.
2. What is meant by a constructive bond retirement in a multi-corporate setting? How does a constructive bond differ from an actual bond retirement?
3. When a parent sells land to a subsidiary at more than book value, the consolidation entries at the end of the period included a debit to the gain on the sale of land. When the parent purchases the bonds of a subsidiary from a non-affiliate at less than book value, the consolidation entries at the end of the period contain a credit to a gain on bond retirement. Why are these two situations not handled in the same manner in the consolidation worksheet?
4. When the parent company purchases a subsidiarys bonds from a non-affiliate for more than book value, what income statement accounts will be affected in preparing consolidated financial statements? What will be the effect on income assigned to the controlling interest in the consolidated income statement?