AdvancedAccounting,11e(Beams/Anthony/Bettinghaus/Smith)Chapter7IntercompanyProfitTransactions-BondsMultipleChoiceQuestions1)Ifthepricepaidbyaparentcompanytoacquirethedebtofasubsidiaryisgreaterthanthebookvalueoftheliability,a________occurs.A)realizedlossontheretirementofdebtfromtheviewpointofthesubsidiaryB)realizedgainontheretirementofdebtfromtheviewpointofthesubsidiaryC)constructivelossontheretirementofdebtfromtheviewpointoftheconsolidatedentityD)constructivegainontheretirementofdebtfromtheviewpointoftheconsolidatedentityAnswer:CObjective:LO1Difficulty:Easy2)Ifanaffiliatepurchasesbondsintheopenmarket,thebookvalueoftheintercompanybondliabilityatthetimeofpurchaseisA)alwaysassignedtotheparentcompanybecauseithascontrol.B)theparvalueofthebondslesstheunamortizeddiscountorplustheunamortizedpremium.C)parvalue.D)theparvalueofthebondsplustheunamortizeddiscountorlesstheunamortizedpremium.Answer:BObjective:LO1Difficulty:Easy3)Bondsissuedbyacompanyremainontheirbooksasaliability,butareconsideredconstructivelyretiredwhenA)thecompanyborrowsmoneyfromunaffiliatedentitiestore-purchaseitsownbondsatagain.B)Thecompanyborrowsmoneyfromanaffiliatetore-purchaseitsownbondsatagain.C)Thecompany'sparentorsubsidiarypurchasesthebondsfromoutsideentities.D)Thecompanyborrowsmoneyfromanaffiliatetorepurchaseitsownbondsatagainorataloss.Answer:CObjective:LO1Difficulty:EasyUsethefollowinginformationtoanswerthequestion(s)below.PascalianCompanyownsa90%interestinSappCompany.OnJanuary1,,Pascalianhad$300,000,6%bondsoutstandingwithanunamortizedpremiumof$9,000.ThebondsmatureonDecember31,.Sappacquiredone-thirdofPascalian'sbondsintheopenmarketfor$97,000onJanuary1,.Bothcompaniesusestraight-lineamortizationofbonddiscounts/premiums.InterestispaidonDecember31.OnDecember31,,thebooksofthetwoaffiliatesheldthefollowingbalances:Pascalian'sbooks6%bondspayable$300,000Premiumonbonds7,200Interestexpense16,200Sapp'sbooksInvestmentinPascalianbonds$97,600Interestincome6,6004)Thegai