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.

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Definitions:

Behaviour

Behaviour encompasses the actions and mannerisms made by individuals, organisms, or systems in response to external stimuli or their environment.

Harassed

Subjected to aggressive pressure or intimidation.

Deaf Ear Syndrome

The tendency to ignore complaints, requests, or pleas, often in a workplace or institutional setting.

Organizations

Groups of people structured in a systematic manner to meet a common goal or set of goals, such as corporations, non-profits, or governments.