A Subsidiary Has Outstanding $100,000 of 8% Bonds That Were

question 40

Multiple Choice

A subsidiary has outstanding $100,000 of 8% bonds that were issued at face value.The parent purchased all the bonds for $96,000 with 5 years remaining to maturity.How will the parent's use of the effective interest amortization rather than straight-line amortization of the discount affect the consolidated financial statements?

• A)​The consolidated financial statements report the same information whether the parent uses straight-line or effective interest amortization on its investment in sub's bonds.
• B)​Will result in a different gain on retirement
• C)​Will result in more interest expense in the first year after the intercompany purchase.
• D)​Will result in less interest expense in the first year after the intercompany purchase.

Recognize the significance of cultural context in psychological perspectives.

Explain the importance of social and environmental factors in shaping individual behavior and thought processes.

Understand the basic principles of time value of money and interest compounding.

Calculate the future value and present value of lump sums and annuities.

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Definitions:

Depreciating Capital

Assets that lose value over time due to wear and tear or obsolescence.

Normal Rate Of Return

The average or expected return on an investment or project, often considered the minimum acceptable return given the risk involved.

Rental Car Industry

A sector of the transportation industry that offers vehicles for hire on a short term basis, typically ranging from a few hours to several weeks.

Irrigation System

A network of supplies and managements used to provide water to agricultural land to aid in the growing of crops.