a.
Introduction: Intragroup transactions are the transactions that occur between two companies in the industry. Instead of showing separate financial statement for two companies a single consolidated financial statement is prepared which constitute assets, liabilities, expenses, incomes of both companies.
The amount of gain or loss reported in B’s Income Statement
b.
Introduction: Consolidation is the process of summarizing and combining the financial statement of two companies into one. Consolidated net income is the sum total of net income of the holding company and net income of its subsidiary companies after deducting unrealized gain in inventories and income from intra-group transactions of the companies.
The amount of gain or loss for the year 20X6 for parent company.
c.
Introduction: Net income is a company's total profits after deducting all business expenses. Net income (NI) is also called net earnings. It is calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses,
To prepare: Calculate amount of gain or loss for the year 20X6 for parent company.
d.
Introduction: In preparing the consolidated financial statement, the sum owed by one company to the other company within the group should be eliminated, for intercompany transactions, and for this, the parent company eliminates the effect of intercompany transactions by making eliminating entries.
To prepare: Eliminating entries to remove effect of inter-corporate ownership of bonds in 20X6
e.
Introduction: In preparing the consolidated financial statement, the sum owed by one company to the other company within the group should be eliminated, for intercompany transactions, and for this, the parent company eliminates the effect of intercompany transactions by making eliminating entries.
To prepare: Worksheet eliminating entries to remove effect of inter-corporate ownership of bonds in 20X7.
f.
Introduction: Consolidation is the process of summarizing and combining the financial statement of two companies into one. Consolidated net income is the sum total of net income of the holding company and net income of its subsidiary companies after deducting unrealized gain in inventories and income from intra-group transactions of the companies.
To prepare: Calculate amount of gain or loss for the year 20X6 for parent company.
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Chapter 8 Solutions
EBK ADVANCED FINANCIAL ACCOUNTING
- Which of the following best describes the accounting for discounts and premiums for bonds purchased by a fiduciary for an estate? a. Premiums are amortized, but discounts are not. b. Discounts are amortized, but premiums are not. c. GAAP guidelines for amortization are followed, i.e., both are amortized. d. Like bonds purchased prior to the death, neither discounts nor premiums are amortized.arrow_forwardWhen bonds are retired at maturity, ________. A. the carrying value always equals the face value B. the carrying value equals the face value plus the unamortized premium or less the unamortized discount C. the bondholders are paid the face value plus the unamortized premium or less the unamortized discount D. the entry to retire the bonds may include a gain or loss on retirement of bondsarrow_forwardwhich of the followings is considered as long term liability :Select one .a mortgage payable .b current portion of long term liability .C bank overdraft .d unearned revenuesarrow_forward
- Presented below is information taken from a bond investment amortization schedule with related fair values provided. These bonds are classified as available-for-sale. Amortized cost Fair value (a) Indicate whether the bonds were purchased at a discount or at a premium. (b) (c) No. (List all debit entries before credit entries. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) (b) C 12/31/25 12/31/26 12/31/27 $489,700 $546,800 $501,000 496,100 535,800 501,000 Prepare the adjusting entry to record the bonds at fair value at December 31, 2025. The Fair Value Adjustment account has a debit balance of $1,100 prior to adjustment. Prepare the adjusting entry to record the bonds at fair value at December 31, 2026. Date eTextbook and Media List of Accounts Account Titles and Explanation Debit Credarrow_forwardBonds that may be redeemed prior to maturity at the option of the issuer are called a. early retirement bonds b. options c. callable bonds d. debenturesarrow_forwardWhich of these items related to bonds would be added back in the Operating section of the SCF under the indirect method? (check all that apply) Amortization of bond discount Loss on bond retirement Gain on bond retirement Unrealized loss on bonds under the fair value option Amortization of bond premiumarrow_forward
- Which of the following is a current liability? Select one: O a. A long-term debt maturing currently, which is to be paid with cash in a sinking fund O b. A long-term debt maturing currently, which is to be converted into ordinary shares O c. None of these O d. A long-term debt maturing currently, which is to be retired with proceeds from a new debt issuearrow_forwardUnamortized debt premium should be reported on the balance sheet of the insurer as a Group of answer choices direct addition to the face amount of the debt deduction from the issue costs deferred credit direct addition to the present value of the debtarrow_forwardWhen bonds are retired prior to maturity, the excess of the retirement price of the carrying amount of the bonds is recorded as loss in OCI gain in P/L gain in OCI loss in P/Larrow_forward
- Investments in equity securities are adjusted to fair value at the end of the period. This adjustment will affect the income statement, statement of comprehensive income, statement of retained earnings and the balance sheet. (True/False) In accounting for pension plans, the projected benefit obligation, service cost and pension plan assets are all valued at present value. (True/False)arrow_forward________ are, in essence, an insurance contract against the default of one or more borrowers. A) Credit default swaps B) CMOs C) ETFs D) Collateralized debt obligations E) All of the options Also state why chose the answer.arrow_forward39. Help me selecting the right answer. Thank youarrow_forward
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