A parent company buys bonds on the open market that had been previously issued by its subsidiary. The price paid by the parent is less than the book value of the bonds on the subsidiary's records. How should the parent report the difference between the price paid and the book value of the bonds on its consolidated financial statements?
A) As a loss on retirement of the bonds
B) As a gain on retirement of the bonds
C) As an increase to interest expense over the remaining life of the bonds
D) Because the bonds now represent intra-entity debt, the difference is not reported.
Ans: B) As a gain on retirement of the bonds
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