The Accounting Problems Encountered in Consolidated Intra-Entity Debt Transactions When

question 112

Multiple Choice

The accounting problems encountered in consolidated intra-entity debt transactions when the debt is acquired by an affiliate from an outside party include all of the following except:

• A) Both the investment and debt accounts have to be eliminated now and for each future consolidated financial statement despite containing differing balances.
• B) Subsequent interest revenue/expense must be removed although these balances fail to agree in amount.
• C) A gain or loss must be recognized by both parent and subsidiary companies.
• D) Changes in the investment, debt, interest revenue, and interest expense accounts occur constantly because of the amortization process.
• E) The gain or loss on the retirement of the debt must be recognized by the business combination in the year the debt is acquired, even though this balance does not appear on the financial records of either company.

---

Definitions:

Full Employment

Full employment is a situation in an economy where all available labor resources are being used in the most efficient way possible, typically when the unemployment rate is low.

American National Railroad

A hypothetical or specific railroad company operating within the United States, involved in the transportation of goods and passengers across the nation. (Note: As of my last update, there's no specific entity known as "American National Railroad," this description assumes a generic interpretation.)

Mass Consumption

A large-scale demand for products or services by a wide range of consumers within an economy.

Transcontinental Railroad

A continuous rail line that spans a continent, typically referring to the major rail networks connecting the east and west coasts of the United States.