Company S Is a 100%-Owned Subsidiary of Company P

question 27

Multiple Choice

Company S is a 100%-owned subsidiary of Company P. On January 1, 20X9, Company S has $200,000 of 8% face rate bonds outstanding, which were issued at face value. The bonds had 5 years to maturity on January 1, 20X9. Premiums or discounts would be amortized on a straight-line basis. On that date, Company P purchased the bonds for $198,000. The amount on the consolidated balance sheet relative to the debt is:

• A) bonds payable $200,000.
• B) bonds payable $200,000, discount $2,000.
• C) bonds payable $200,000, discount $1,600.
• D) The bonds do not appear on the balance sheet.

Understanding the fundamental parties to checks and notes.

Grasping the criteria for the negotiability requirement being payable at a definite time under Article 3.

Differentiating between the effects of references to other agreements on negotiable instruments and understanding when an instrument becomes subject to the terms of another agreement.

Identifying and summarizing the requirements of negotiability as stipulated by the Code.

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Definitions:

Intangible Assets

Assets that lack physical substance, such as patents, trademarks, and goodwill.

Physical Substance

The material form or physical presence of an asset, distinguishing tangible assets from intangible ones.

Market Forces

The natural dynamics of supply and demand that determine the prices and availability of goods and services in an economy without external influences.

Comparisons

The act or instance of examining the similarities and differences between two or more items.