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chap006 - Multiple Choice Questions 1 On January 1 2003...

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Multiple Choice Questions 1. On January 1, 2003, Riley Corp. acquired some of the outstanding bonds of one of its subsidiaries. The bonds had a carrying value of $421,620, and Riley paid $401,937 for them. How should you account for the difference between the carrying value and the purchase price in the consolidated financial statements for 2003? A) The difference is added to the carrying value of the debt. B) The difference is deducted from the carrying value of the debt. C) The difference is treated as a loss from the extinguishment of the debt. D) The difference is treated as a gain from the extinguishment of the debt. E) The difference does not influence the consolidated financial statements. Answer: D Difficulty: Easy 2. Safire Corp. recently acquired $500,000 of the bonds of Regency Co., one of its subsidiaries, paying more than the carrying value of the bonds. To whom would the loss probably be attributed using the face value method? 3. Which one of the following characteristics of preferred stock would make the stock resemble a liability?
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4. Which one of the following characteristics of preferred stock would make the stock resemble an equity? 5. Where do dividends paid to the noncontrolling interest of a subsidiary appear on a consolidated statement of cash flows ? A) Cash flows from operating activities B) Cash flows from investing activities C) Cash flows from financing activities D) Supplemental schedule of noncash investing and financing activities E) They do not appear on the consolidated statement of cash flows . Answer: C Difficulty: Easy
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