Allocation
According to the text Advanced Accounting, bonds are debt that areissued for a period of more than one year. Although the US government,local governments, water districts, companies and many other types ofinstitutions sell bonds, there also a potential value for a for a parentcompany to extend bonds, or to extend credit, to subsidiary companies ofthe parent. A parent company that purchases its subsidiary's bonds wouldeliminate investment on paper in terms of its bonds and bonds
com, 2004) Thus, indirectmeans of inter-company lending may be preferred, if it is in the company'sinterest to alter the method of allocation. For instance, if the parent hadelected to report its gains from its assets on an installment basis, thesubsidiary would be also required to continue reporting its gain on thesame basis. According to "Affiliated Corporation," for the parental company, theprofit on the collections on the note from the point of view of thesubsidiary company would be viewed a gain from the sale of a capital asset,the same as in the hands of the parent. Although inter-company bond transactions can occur through direct andindirect means, for a parent company is to lend money directly to asubsidiary company, the subsidiary must continue to report its gain on thesame basis, although this gain may be less of a share of its profits thanin the case of the parent company. The smallsubsidiary would pay less potential tax, yet the overall organization wouldaccrue more given the lesser tax paid by the larger parent organization incomparison to the subsidiary, and also the parent's ability to gain greatercontrol over the organization of the subsidiary company. payable, itsinterest receivable and interest payable and interest revenue and interestexpense and transfer these assets to the subsidiary company.
Common topics in this essay:
Advanced Accounting,
Affiliated Corporation,
subsidiary company,
parent company,
,
gain basis,
indirect means,
company subsidiary,
subsidiary company subsidiary,
|
Acceptance Essays
