江西财经大学高级财务会计国际学院题库chapter07.docx
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江西财经大学高级财务会计国际学院题库chapter07
AdvancedAccounting,11e（Beams/Anthony/Bettinghaus/Smith）
Chapter7IntercompanyProfitTransactions-Bonds
MultipleChoiceQuestions
1）Ifthepricepaidbyaparentcompanytoacquirethedebtofasubsidiaryisgreaterthanthebookvalueoftheliability,a________occurs.
A）realizedlossontheretirementofdebtfromtheviewpointofthesubsidiary
B）realizedgainontheretirementofdebtfromtheviewpointofthesubsidiary
C）constructivelossontheretirementofdebtfromtheviewpointoftheconsolidatedentity
D）constructivegainontheretirementofdebtfromtheviewpointoftheconsolidatedentity
Answer:
C
Objective:
LO1
Difficulty:
Easy
2）Ifanaffiliatepurchasesbondsintheopenmarket,thebookvalueoftheintercompanybondliabilityatthetimeofpurchaseis
A）alwaysassignedtotheparentcompanybecauseithascontrol.
B）theparvalueofthebondslesstheunamortizeddiscountorplustheunamortizedpremium.
C）parvalue.
D）theparvalueofthebondsplustheunamortizeddiscountorlesstheunamortizedpremium.
Answer:
B
Objective:
LO1
Difficulty:
Easy
3）Bondsissuedbyacompanyremainontheirbooksasaliability,butareconsideredconstructivelyretiredwhen
A）thecompanyborrowsmoneyfromunaffiliatedentitiestore-purchaseitsownbondsatagain.
B）Thecompanyborrowsmoneyfromanaffiliatetore-purchaseitsownbondsatagain.
C）Thecompany'sparentorsubsidiarypurchasesthebondsfromoutsideentities.
D）Thecompanyborrowsmoneyfromanaffiliatetorepurchaseitsownbondsatagainorataloss.
Answer:
C
Objective:
LO1
Difficulty:
Easy
Usethefollowinginformationtoanswerthequestion（s）below.
PascalianCompanyownsa90%interestinSappCompany.OnJanuary1,2010,Pascalianhad$300,000,6%bondsoutstandingwithanunamortizedpremiumof$9,000.ThebondsmatureonDecember31,2014.Sappacquiredone-thirdofPascalian'sbondsintheopenmarketfor$97,000onJanuary1,2010.Bothcompaniesusestraight-lineamortizationofbonddiscounts/premiums.InterestispaidonDecember31.OnDecember31,2010,thebooksofthetwoaffiliatesheldthefollowingbalances:
Pascalian'sbooks
6%bondspayable$300,000
Premiumonbonds7,200
Interestexpense16,200
Sapp'sbooks
InvestmentinPascalianbonds$97,600
Interestincome6,600
4）ThegainfromthebondpurchasethatappearedontheDecember31,2010consolidatedincomestatementwas
A）$4,320.
B）$4,800.
C）$5,400.
D）$6,000.
Answer:
D
Explanation:
D）
BookvalueofPascalian'sbonds
acquiredbySappequals1/3
times（$300,000+$9,000）$103,000
Less:
Costofacquiring
Pascalianbonds（97,000）
Constructivegainonbonds$6,000
Objective:
LO2
Difficulty:
Moderate
5）ConsolidatedInterestExpenseandconsolidatedInterestIncome,respectively,thatappearedontheconsolidatedincomestatementfortheyearendedDecember31,2010was
A）$10,800and$0.
B）$10,800and$6,600.
C）$0and$0.
D）$16,200and$6,600.
Answer:
A
Explanation:
A）Consolidatedinterestexpense=
$16,200×2/3$10,800
Objective:
LO2
Difficulty:
Moderate
6）PrussiaCorporationowns80%thevotingstockofStadCorporation.OnJanuary1,2010,Prussiapaid$391,000cashfor$400,000parofStad's10%$1,000,000parvalueoutstandingbonds,dueonApril1,2015.Stad'sbondshadabookvalueof$1,045,000onJanuary1,2010.Straight-lineamortizationisused.Thegainorlossontheconstructiveretirementof$400,000ofStadbondsonJanuary1,2010wasreportedinthe2010consolidatedincomestatementintheamountof
A）$14,000.
B）$21,600.
C）$23,000.
D）$27,000.
Answer:
D
Objective:
LO2
Difficulty:
Moderate
Usethefollowinginformationtoanswerthequestion（s）below.
PfadtInc.had$600,000parof8%bondspayableoutstandingonJanuary1,2011dueJanuary1,2015withanunamortizeddiscountof$12,000.Senatisa90%-ownedsubsidiaryofPfadt.OnJanuary2,2011,SenatCorporationpurchased$150,000parvalueofPfadt'soutstandingbondsfor$152,000.ThebondshaveinterestpaymentdatesofJanuary1andJuly1.Straight-lineamortizationisused.
7）Withrespecttothebondpurchase,theconsolidatedincomestatementofPfadtCorporationandSubsidiaryfor2011showedagainorlossof
A）$4,500.
B）$5,000.
C）$10,800.
D）$12,000.
Answer:
B
Explanation:
B）[（$588,000×0.25）-$152,000]
Objective:
LO2
Difficulty:
Moderate
8）BondInterestReceivablefor2011ofPfadt'sbondsonSenat'sbookswas
A）$5,400.
B）$6,000.
C）$10,800.
D）$12,000.
Answer:
B
Explanation:
B）[$150,000×8%×1/2]
Objective:
LO2
Difficulty:
Moderate
9）BondsPayableappearedintheDecember31,2011consolidatedbalancesheetofPfadtCorporationandSubsidiaryintheamountof
A）$398,925.
B）$441,000.
C）$443,250.
D）$450,000.
Answer:
C
Explanation:
C）[$591,000×75%]
Objective:
LO2
Difficulty:
Moderate
Usethefollowinginformationtoanswerthequestion（s）below.
PlentyCorporationissuedsixthousand,$1,000par,6%bondsonJanuary1,2010,atpar.InterestispaidonJanuary1andJuly1ofeachyear;thebondsmatureonJanuary1,2015.OnJanuary2,2012,ScrawnCorporation,a75%-ownedsubsidiaryofPlenty,purchased3,000ofthebondsontheopenmarketat102.50.Plenty'sseparatenetincomefor2012includedtheannualinterestexpenseforall3,000bonds.Scrawn'sseparatenetincomefor2012was$400,000,whichincludedthebondinterestreceivedonJuly1aswellastheaccrualofbondinterestrevenueearnedonDecember31.Bothcompaniesusestraight-lineamortizationofbonddiscounts/premiums.
10）Whatwastheamountofgainor（loss）fromtheintercompanypurchaseofPlenty'sbondsonJanuary2,2012?
A）$（56,250）
B）$（75,000）
C）$75,000
D）$56,250
Answer:
B
Explanation:
B）
Totalbookvalueacquired=
$6,000,000×50%$3,000,000
Purchaseprice3,000×$1,0253,075,000
Lossonconstructiveretirement$75,000
Objective:
LO2
Difficulty:
Moderate
11）Ifthebondswereoriginallyissuedat106,and80%ofthemwerepurchasedbyScrawnonJanuary2,2013at98,thegainor（loss）fromtheintercompanypurchasewas
A）$（384,000）.
B）$（211,200）.
C）$211,200.
D）$384,000.
Answer:
C
Explanation:
C）
BookvalueatJanuary2,2013equals
$6,360,000minus$216,000=$6,144,000
Percentageofbondsacquired80%
Equalsbookvalueacquired4,915,200
Purchaseprice4,800bonds×$980=4,704,000
Gainonconstructiveretirement=$211,200
Objective:
LO2
Difficulty:
Moderate
12）Ifthebondswereoriginallyissuedat103,and70%ofthemwerepurchasedonJanuary2,2014at104,theconstructivegainor（loss）onthepurchasewas
A）$（142,800）.
B）$（42,000）.
C）$42,000.
D）$142,800.
Answer:
A
Explanation:
A）
BookvalueatJanuary2,2014equals
$6,180,000minus$144,000$6,036,000
Percentageofbondsacquired70%
Equalsbookvalueacquired4,225,200
Purchaseprice4,200bonds×$1,0404,368,000
Lossonconstructiveretirement$142,800
Objective:
LO2
Difficulty:
Moderate
13）Usingtheoriginalinformation,theamountofconsolidatedInterestExpensefor2012was
A）$135,000.
B）$180,000.
C）$270,000.
D）$360,000.
Answer:
B
Explanation:
B）（$6,000,000-$3,000,000）×6%
Objective:
LO2
Difficulty:
Moderate
14）Usingtheoriginalinformation,thebalancesfortheBondsPayableandBondInterestPayableaccounts,respectively,ontheconsolidatedbalancesheetforDecember31,2013were
A）$3,000,000and$90,000.
B）$3,000,000and$180,000.
C）$6,000,000and$90,000.
D）$6,000,000and$180,000.
Answer:
A
Explanation:
A）Bondspayable$6,000,000minusbondsheldbyScrawnof$3,000,000.InterestaccruedonDecember31,2013willbetheinterestonbondsheldbynon-affiliatesor$3,000,000×6%×1/2year
Objective:
LO2,3
Difficulty:
Moderate
15）Usingtheoriginalinformation,theeliminationentriesontheconsolidationworkingpaperspreparedonDecember31,2012includedatleast
A）debittoBondInterestExpensefor$360,000.
B）credittoBondInterestExpensefor$180,000andadebittoBondInterestPayablefor$90,000.
C）credittoBondInterestReceivablefor$180,000.
D）debittoBondInterestRevenuefor$360,000.
Answer:
B
Objective:
LO2
Difficulty:
Moderate
16）Noconstructivegainorlossarisesfromthepurchaseofanaffiliate'sbondsifthe
A）affiliateisa100%-ownedsubsidiary.
B）bondsarepurchasedatbookvalue.
C）bondsarepurchasedwitharm's-lengthbargainingfromoutsideentities.
D）gainorlosscannotbereasonablyestimated.
Answer:
B
Objective:
LO1
Difficulty:
Easy
17）Thereareseveraltheoriesforallocatingconstructivegainsorlossesbetweenpurchasingandissuingaffiliates.TheAgencyTheory
A）doessobasedontheparvalueofthebondspurchased.
B）assignstheentireconstructivegainorlosstotheparentbasedontheircontrolofthedecisiontopurchasethebonds.
C）assignstheentireconstructivegainorlosstothesubsidiarybasedontheneedtohavethenoncontrollinginterestshareintheretirementofthedebt.
D）assignstheentireconstructivegainorlosstowhichevercompanyissuedthebonds.
Answer:
D
Objective:
LO1
Difficulty:
Easy
18）PickleIncorporatedacquireda$10,000bondoriginallyissuedbyits80%-ownedsubsidiaryonJanuary2,2011.Thebondwasissuedinaprioryearfor$11,250,maturesJanuary1,2016,andpays9%interestatDecember31.Thebond'sbookvalueatJanuary2,2011is$10,625,andPicklepaid$9,500topurchaseit.Straight-lineamortizationisusedbybothcompanies.Howmuchinterestincomeshouldbeeliminatedin2011?
A）$720
B）$800
C）$900
D）$1,000
Answer:
D
Explanation:
D）$9,500-$10,000=discounttoamortizeasinterestexpenseover5years,or$100peryear+$900paidbyissuer.
Objective
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