there are all multiple choice, but i need necessary calculate


Question Description:

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there are all multiple choice, but i need necessary calculate steps of all of them. i have the right answers. i just need the step to those questions Chap008.doc Chapter 08 – Intercompany Indebtedness Chapter 08 Intercompany Indebtedness Answer Key Multiple Choice Questions 1. Cutler Company owns 80 percent of the common stock of Marina Inc. Cutler acquires some of Marina’s bonds from an unrelated party for less than the carrying value on Marina’s books and holds them as a long-term investment. For consolidated reporting purposes, how is the acquisition of Marina’s bonds treated? A. As a decrease in the Bonds Payable account on Marina’s books. B. As an increase in noncurrent assets. C. Everything related to the bonds is eliminated in the consolidation worksheet, and nothing related to the bonds appears in the consolidated financial statements. D. As a retirement of bonds. 2. Culver owns 80 percent of the common stock of Fowler Company. Culver also purchases some of Fowler’s bonds directly from Fowler and holds the bonds as a long-term investment. How is the acquisition of the bonds treated for consolidated reporting purposes? A. As a retirement of bonds. B. As an increase in the Bonds Payable account on Fowler’s books. C. Everything related to the bonds is eliminated in the consolidation worksheet, and nothing related to the bonds appears in the consolidated financial statements. D. As an increase in noncurrent assets. 3. At the end of the year, a parent acquires a wholly owned subsidiary’s bonds from unaffiliated parties at a cost less than the subsidiary’s carrying value. The consolidated net income for the year of acquisition should include the parent’s separate operating income plus: A. the subsidiary’s net income increased by the gain on constructive retirement of debt. B. the subsidiary’s net income decreased by the gain on constructive retirement of debt. C. the subsidiary’s net income increased by the gain on constructive retirement of debt, and decreased by the subsidiary’s bond interest expense. D. the subsidiary’s net income decreased by the gain on constructive retirement of debt, and decreased by the subsidiary’s bond interest expense. 4. A loss on the constructive retirement of a parent’s bonds by a subsidiary is effectively recognized in the accounting records of the parent and its subsidiary: I. at the date of constructive retirement. II. over the remaining term of the bonds. A. I B. II C. Both I and II D. Neither I nor II 8-1 Chapter 08 – Intercompany Indebtedness 5. When one company purchases the debt of an affiliate from an unrelated party, a gain or loss on the constructive retirement of debt is recognized by which of the following? A. Option A B. Option B C. Option C D. Option D 6. Which of the following statements is (are) correct? I. The amount assigned to the noncontrolling interest may be affected by a constructive retirement of bonds. II. A constructive retirement of bonds normally results in an extraordinary gain or loss. III. In constructive retirement, the bonds are considered outstanding, even though they are treated as if they were retired in preparing consolidated financial statements. A. I B. II C. I and III D. I, II, and III 8-2 Chapter 08 – Intercompany Indebtedness 7. On January 1, 20X6, Nichols Corporation issued 10-year bonds at par to unrelated parties. The bonds pay interest of $15,000 every June 30 and December 31. On December 31, 20X9, Harn Corporation purchased all of Nichols’ bonds in the open market at a $6,000 discount. Harn is Nichols’ 80 percent owned subsidiary. Harn uses the straight line method of amortization. The consolidated income statement for the year 20X9 should report with respect to the bonds: I. interest expense of $30,000. II. an extraordinary gain of $6,000. A. I B. II C. Either I or II D. Neither I nor II Light Corporation owns 80 percent of Sound Company’s voting shares. On January 1, 20X7, Sound sold bonds with a par value

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