Pancake Corporation Owns 85 Percent of Syrup Corporation's Voting Shares

question 10

Multiple Choice

Pancake Corporation owns 85 percent of Syrup Corporation's voting shares.On January 1,20X8,Pancake Corporation sold $200,000 par value 8 percent bonds to Syrup for $245,000.The bonds mature in 10 years and pay interest semiannually on January 1 and July 1.
-Based on the information given above,in the preparation of the 20X8 consolidated financial statements,premium on bonds payable will be:

• A)debited for $45,000 in the consolidating entries.
• B)credited for $40,500 in the consolidating entries.
• C)debited for $40,500 in the consolidating entries.
• D)credited for $45,000 in the consolidating entries.

---

Definitions:

Cash Payments

Transactions where cash is exchanged for goods, services, or to settle an obligation.

Cash Dividends

A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.

Dividends Payable

This refers to the amount of declared dividends owed by a company to its shareholders but has not yet been paid out.

Stockholders

Individuals or entities that own shares in a corporation, giving them a partial ownership interest in the company.