Bon Ltd Owns 100% of the Issued Ordinary Share Capital

Multiple Choice

Bon Ltd owns 100% of the issued ordinary share capital of Jovi Ltd.On June 30 20X1, Bon Ltd issued 1000 eight year debentures of face amount $100 each, paying 10% pa interest.These debentures were issued to the general public, to persons not related to the Bon Group.On July 1 20X4 Jovi bought all these debentures on a stock exchange.The sale price totaled $80 000.What is the elimination entry (if any) for the financial year ended June 30 20X5?

A) $\begin{array} { l c c } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Debentures (liability) } & 100000 & \\\text { Debentures (asset) } & & 100000\end{array}$
B) $\begin{array} { l c c } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Debentures (liability) } & 100000 & \\\text { Debentures (asset) } & & 80000 \\\text { Gain on debt retirement } & & 20000\end{array}$
C) $\begin{array} { l r r } \text { Accounts } & \text { Debit \$ } & \text { Credit \$ } \\\text { Debentures (liability) } & 80000 & \\\text { Debentures (asset) } & & 80000\end{array}$
D) No elimination entry is required because the debentures were purchased from outside the group, thus constituting a real transaction