Subsidiary Company S has $1,000,000 of bonds outstanding at 8% annual interest. The bonds have 10 years to maturity. If the parent, Company P, is able to purchase the bonds at a price that reflects 6% annual interest, what effect will the purchase have on consolidated income in the current and future years? What would the effects be if the purchase price reflected a 9% annual interest rate? Your response need not be quantified.
Answer to relevant QuestionsSubsidiary Company S has $1,000,000 of bonds outstanding at 8% annual interest. The bonds have 10 years to maturity. If the parent, Company P, is able to purchase the bonds at a price that reflects 6% annual interest, how ...Mode Engineering is a large corporation with the ability to obtain financing by selling its bonds at favorable rates. Currently, it pays 6% interest on its 10-year bond issues. In the past year, Mode acquired an 80% interest ...On January 1, 2011, Traylor Company, an 80%-owned subsidiary of Parker Electronics, Inc., signed a 4-year direct-financing lease with its parent for the rental of electronic equipment. The lease agreement requires a $12,000 ...Plessor Industries acquired 80% of the outstanding common stock of Slammer Company on January 1, 2011, for $320,000. On that date, Slammer’s book values approximated fair values, and the balance of its retained earnings ...Refer to the preceding facts for Postman’s acquisition of 80% of Spartan’s common stock and the bond transactions. Postman uses the simple equity method to account for its investment in Spartan. On January 1, 2016, ...
Post your question