If Newly Issued Debt Is Issued from a Parent to Its

question 105

Multiple Choice

If newly issued debt is issued from a parent to its subsidiary, which of the following statements is false?

• A) Any premium or discount on bonds payable is exactly offset by a premium or discount on bond investment.
• B) There will be $0 net gain or loss on the bond transaction.
• C) Interest expense needs to be eliminated on the consolidated income statement.
• D) Interest revenue needs to be eliminated on the consolidated income statement.
• E) A net gain or loss on the bond transaction will be reported.

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Definitions:

Legal Fees

Charges for services provided by lawyers or law firms.

Project Analysis

The process of evaluating the viability and profitability of a proposed project or investment.

Grading Costs

Expenses associated with evaluating and categorizing assets or investments based on their quality, condition, or potential risks.

Operating Costs

Expenses associated with the day-to-day functions of a business, excluding costs related to production.