The GAAP Requires the Effective Interest Method of Amoritization on Transactions

question 7

True/False

The GAAP requires the effective interest method of amoritization on transactions between parent and subsidiary companies.

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Definitions:

Transactions

Financial events or exchanges between parties that have a monetary impact on the financial statements of a business.

Adjusted Trial Balance

A list of all accounts and their balances after adjustments are made, used to prepare financial statements.

Year-End Closing Entries

Journal entries made at the end of an accounting period to prepare the accounts for the next period by clearing out revenues and expenses to the income summary.

Owner's Drawings

The withdrawal of business assets by the owner for personal use, which reduces the equity of the owner in the business.