Questions from Financial Accounting

Q: A parent company purchased its subsidiary’s bonds from a nonaffiliate in the

A parent company purchased its subsidiary’s bonds from a nonaffiliate in the preceding year, and a loss on bond retirement was reported in the consolidated income statement. How will income assigned t...

Q: Intercompany debt, both long term and short term, arises frequently

Intercompany debt, both long term and short term, arises frequently. In some cases, intercorporate borrowings may arise because one affiliate can borrow at a cheaper rate than others, and lending to o...

Q: A parent purchases a subsidiary’s bonds directly from it. The parent

A parent purchases a subsidiary’s bonds directly from it. The parent later sells the bonds to a nonaffiliate. From a consolidated viewpoint, what occurs when the parent sells the bonds? Is a gain or l...

Q: Shortly after a parent company purchased its subsidiary’s bonds from a nonaffiliate

Shortly after a parent company purchased its subsidiary’s bonds from a nonaffiliate, the subsidiary retired the entire issue. How is the gain or loss on bond retirement reported by the subsidiary trea...

Q: What effect will a subsidiary’s 15 percent stock dividend have on the

What effect will a subsidiary’s 15 percent stock dividend have on the consolidation entries used in preparing a consolidated balance sheet at the end of the year in which the dividend is distributed?...

Q: When multilevel affiliations exist, explain why it is generally best to

When multilevel affiliations exist, explain why it is generally best to prepare consolidated financial statements by completing the consolidation entries for companies furthest from parent company own...

Q: Why are subsidiary preferred dividends that are paid to nonaffiliates normally deducted

Why are subsidiary preferred dividends that are paid to nonaffiliates normally deducted from earnings in arriving at consolidated net income? When is it not appropriate to deduct subsidiary preferred...

Q: How does a call feature on subsidiary preferred stock affect the claim

How does a call feature on subsidiary preferred stock affect the claim of the noncontrolling interest reported in the consolidated balance sheet?

Q: A subsidiary sells additional shares of its common stock to a nonaffiliate

A subsidiary sells additional shares of its common stock to a nonaffiliate at a price that is higher than the previous book value per share. How does the sale benefit the existing shareholders?

Q: A parent company purchases additional common shares of one of its subsidiaries

A parent company purchases additional common shares of one of its subsidiaries from the subsidiary at $10 per share above underlying book value. Explain how this purchase is reflected in the consolida...