Ch8 - Ch8 Student: _ 1. Cutler Company owns 80 percent of...

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Ch8 Student: ___________________________________________________________________________ 1. Cutler Company owns 80 percent of the common stock of Marina, Incorporated. Cutler acquires some of Marina's bonds from an unrelated party 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 workpaper, and nothing related to the bonds appears in the consolidated financial statements. D. As a retirement of bonds. 2. Culver Company owns 25 percent of the common stock of Davis Company. Culver also acquires some of Davis' bonds from an unrelated party and holds them as a long-term investment. How is the acquisition of Davis' bonds treated by Culver Company? A. As an increase in the Bonds Payable account on Davis' books. B. As a retirement of bonds. C . Everything related to the bonds is eliminated in the consolidation workpaper, and nothing related to the bonds appears in the consolidated financial statements. D. As an increase in noncurrent assets. 3. 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 workpaper, and nothing related to the bonds appears in the consolidated financial statements. D. As an increase in noncurrent assets. On July 1, 2007, Villa Company issued bonds with a par value of $1,000,000 to its parent at 103. The bonds have a coupon rate of 8 percent, pay interest on January 1 and July 1, and are due 5 years from the date of issue. On January 1, 2009, Villa retired half of the bonds at par. Villa is 80 percent owned by its parent company. The straight-line method is used to amortize any premium or discount. 4. Refer to the information given above. When preparing consolidated financial statements for 2007, what amount must be eliminated from the Bonds Payable account in the consolidation workpaper? A. $0 B. $1,000,000 C. $1,027,000 D. $1,030,000
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5. Based on the information given above, the amount of interest income from the bond investment to be included in consolidated net income for 2007 is: A. $0 B. $37,000 C. $40,000 D. $74,000 6. Refer to the information given above. What amount of premium on bonds payable would be eliminated in the consolidation workpaper used to prepare consolidated financial statements for 2007? A. $ 3,000
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Ch8 - Ch8 Student: _ 1. Cutler Company owns 80 percent of...

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