Affiliate bonds purchased from non-affiliate: The consolidated entity, on the acquisition of an affiliate’s bond from non-affiliates, retires it at the time of purchase. The acquisition of an affiliate’s bonds by another company within the consolidated entity is referred to as constructive retirement. Under constructive retirement, the gain or loss on retirement are shown in the consolidated income statement for the period, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in the consolidated financial statement. To choose: The correct answer to determine amount of interest income recorded by G for 20X6.

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Chapter 8, Problem 8.5.4E

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Affiliate bonds purchased from non-affiliate: The consolidated entity, on the acquisition of an affiliate’s bond from non-affiliates, retires it at the time of purchase. The acquisition of an affiliate’s bonds by another company within the consolidated entity is referred to as constructive retirement.

Under constructive retirement, the gain or loss on retirement are shown in the consolidated income statement for the period, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in the consolidated financial statement.

To choose: The correct answer to determine amount of interest income recorded by G for 20X6.

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