On June 30, 2013 Tulip Ltd

question 24

Multiple Choice

On June 30, 2013 Tulip Ltd. issued one hundred $1,000 bonds with an interest rate of 7% p.a. payable semi-annually on December 31 and June 30 of each year. Crockus Inc., a wholly-owned subsidiary of Tulip Ltd., acquired 75% of the bonds issued. What are some of the December 31, 2013 adjustments required in preparation for the consolidated financial statements?

• A)Decrease Bonds Payable: $100,000, decrease Bond Investment: $100,000, decrease Interest Payable: $7,000, and decrease Interest Receivable: $7,000.
• B)Increase Bonds Payable: $100,000, increase Bond Investment: $100,000, increase Interest Payable: $7,000, and increase Interest Receivable: $7,000.
• C)Decrease Bonds Payable: $75,000, decrease Bond Investment: $75,000, decrease Interest Payable: $2,625, and decrease Interest Receivable: $2,625.
• D)Decrease Bonds Payable: $75,000, decrease Bond Investment: $75,000, decrease Interest Payable: $5,250, and decrease Interest Receivable: $5,250.

---

Definitions:

Financial Statements

Reports that provide an overview of a company's financial condition, including balance sheets, income statements, and statements of cash flows.

Recognized

Refers to the formal acknowledgment in financial accounting of particular transactions and events in the financial statements.

Definition Of An Element

In accounting, an element refers to the essential categories into which all financial transactions can be classified, such as assets, liabilities, equity, revenue, and expenses.

Financial Flexibility

The ability of an entity to adapt to unforeseen expenses or investment opportunities without significant stress.