Regency Corp. recently acquired $500,000 of the bonds of Safire Co., one of its subsidiaries, paying more than the carrying value of the bonds. According to the most practical view of this intra-entity transaction, to whom should the loss be attributed?
A) To Safire because the bonds were issued by Safire.
B) The loss should be allocated between Safire and Regency based on the purchase price and the original face value of the debt.
C) The loss should be amortized over the life of the bonds and need not be attributed to either party.
D) The loss should be deferred until it can be determined to whom the attribution can be made.
E) To Regency because Regency is the controlling party in the business combination.

Question

Quizplus · Accepted Answer

The loss should be attributed to Regency because it is the controlling party in the business combination, and the transaction is considered an intra-entity transaction.