The Accounting Problems Encountered in Consolidated Intra-Entity Debt Transactions When

question 112

Multiple Choice

The accounting problems encountered in consolidated intra-entity debt transactions when the debt is acquired by an affiliate from an outside party include all of the following except:

• A) Both the investment and debt accounts have to be eliminated now and for each future consolidated financial statement despite containing differing balances.
• B) Subsequent interest revenue/expense must be removed although these balances fail to agree in amount.
• C) A gain or loss must be recognized by both parent and subsidiary companies.
• D) Changes in the investment, debt, interest revenue, and interest expense accounts occur constantly because of the amortization process.
• E) The gain or loss on the retirement of the debt must be recognized by the business combination in the year the debt is acquired, even though this balance does not appear on the financial records of either company.

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Definitions:

Merton's Strain Theory

A sociological theory that explains deviance in terms of the pressure individuals feel to achieve socially accepted goals by legitimate means.

Deviance

Actions or behaviors that violate societal norms or regulations, which can result in disapproval from the majority of society.

Consensus Crimes

These are offenses that are widely regarded by society as being morally unacceptable or reprehensible, such as murder or theft.

Homicide

The act of one human being killing another, either lawfully (such as self-defense) or unlawfully (murder or manslaughter).