Consider the Following Journal Entry

question 22

Multiple Choice

Consider the following journal entry:

Which of the following explanations best describes this journal entry?

• A) The company buys $10,000 of equipment, pays cash of $4,000, and signs a note for $6,000.
• B) The company receives $4,000 in cash and $6,000 in notes payable in exchange for selling $10,000 of equipment.
• C) The company buys $10,000 of equipment, pays $4,000 cash, and promises to cancel a debt owed to the company in the amount of $6,000.
• D) The company sells $10,000 of equipment, receives $4,000 in cash, and pays off $6,000 it owes on the equipment.

Assess the impact of inter-company transactions on consolidated financial statements.

Identify the treatment of intangible assets with indefinite lives and their impairment tests.

Analyze the effect of non-controlling interests on consolidated financial statements.

Apply fair value adjustments in the context of business combinations.

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Definitions:

Basement Membrane

A thin, fibrous structure that lies underneath epithelial cells, providing support and anchorage, and acting as a barrier against the spread of cells.

Gap Junction

Junction between cells formed by the joining of two adjacent plasma membranes; it lends strength and allows ions, sugars, and small molecules to pass between cells.

Adhesion Junction

Junction between cells in which the adjacent plasma membranes do not touch but are held together by intercellular filaments attached to buttonlike thickenings.

Tight Junction

A complex of proteins in the cell membrane that creates a watertight seal between cells, preventing leakage of extracellular fluid.