The parent entity, JEZ, has purchased on the open market, for an amount less than par value, some bonds previously issued at par, by its wholly owned subsidiary, Northco. The group accountant for JEZ, James Cong, has stated that the adjustment in the consolidated financial statement includes the recording of an account called Income on Redemption. He is unsure whether this is correct.
Required
(a) What does this account represent?
(b) Would an adjustment to income, or subsequently to retained earnings, have to be made for the rest of the life of the group? If not, what event would cause the discontinuation of this adjustment?