If the Price Paid by a Parent Company to Acquire

question 5

Multiple Choice

If the price paid by a parent company to acquire the debt of a subsidiary is greater than the book value of the liability,a ________ occurs.

• A)realized loss on the retirement of debt from the viewpoint of the subsidiary
• B)realized gain on the retirement of debt from the viewpoint of the subsidiary
• C)constructive loss on the retirement of debt from the viewpoint of the consolidated entity
• D)constructive gain on the retirement of debt from the viewpoint of the consolidated entity

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Definitions:

Standard Cost

A predetermined cost of manufacturing a single unit or a number of units of a product, which is used for budgetary and cost control purposes.

Favorable Variance

Occurs when actual performance is better than expected, leading to lower costs or higher revenues than planned.

Budgeted Revenue

The projected income that a business or organization expects to generate within a specific period, often used for planning and performance evaluation.

Standard Costs

Predetermined costs assigned to goods and services, used as a benchmark for evaluating actual production costs.