The purchase of outstanding subsidiary bonds by the parent company has the same impact on consolidated statements as:

Question

The purchase of outstanding subsidiary bonds by the parent company has the same impact on consolidated statements as:​

Quizplus · Accepted Answer

When a parent company purchases outstanding subsidiary bonds, it is similar to the subsidiary retiring its debt with proceeds from a loan from the parent. This is because, from a consolidated perspective, the intercompany transaction (the parent loaning money to the subsidiary to retire the debt) eliminates the debt from the consolidated financial statements, just as the purchase of the bonds by the parent would.

The Purchase of Outstanding Subsidiary Bonds by the Parent Company