Pointe Company Purchased Bonds from Sentient Company on the Open

question 24

Multiple Choice

Pointe Company purchased bonds from Sentient Company on the open market at a premium.Sentient Company is a 100% owned subsidiary of Pointe Company.Pointe intends to hold the bonds until maturity.In a consolidated balance sheet, the difference between the bond carrying values in the two companies would be:

• A)included as a decrease to retained earnings.
• B)included as an increase to retained earnings.
• C)reported as a deferred debit to be amortized over the remaining life of the bonds.
• D)reported as a deferred credit to be amortized over the remaining life of the bonds.

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Definitions:

Net Income

The profit of a company after all expenses and taxes have been deducted from total revenue.

Balance of Payments

A financial statement that summarizes a country’s transactions with the rest of the world, including imports, exports, and capital flows.

Credit Item

An entry that increases the balance in a bank account or financial statement, signifying an inflow of funds.

American Car

Refers to automobiles manufactured by companies based in the United States, known for their significant contribution to the automotive industry.