Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium. If the bonds purchased by S were at par or premium.

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Answer 1

Question

Chapter 8, Problem 8.4C

a

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

If the bonds purchased by S were at par or premium.

b

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

if the subsidiary bonds were originally sold at premium or discount, will annual interest payment received by S is more or less than interest expense. How is the difference between interest income recorded by S and how interest expense is recorded by subsidiary.

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Did Delta have to disclose the market value of bonds in financial statements? a. No b. Yes, in footnotes c. Yes, in footnotes and on the face balance sheet d. Yes, but only if they can compute a market value.

A discount on bonds payable: Multiple Choice A) Occurs when a company issues bonds with a contract rate more than the market rate. B) Is not allowed in many states to protect creditors. C) Occurs when a company issues bonds with a contract rate less than the market rate. D) Decreases the total bond interest expense. E) Increases the Bond Payable account.

Answer 2

Question

Chapter 8, Problem 8.4C

a

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

If the bonds purchased by S were at par or premium.

b

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

if the subsidiary bonds were originally sold at premium or discount, will annual interest payment received by S is more or less than interest expense. How is the difference between interest income recorded by S and how interest expense is recorded by subsidiary.

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Answer 3

Question

Chapter 8, Problem 8.4C

a

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

If the bonds purchased by S were at par or premium.

b

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

if the subsidiary bonds were originally sold at premium or discount, will annual interest payment received by S is more or less than interest expense. How is the difference between interest income recorded by S and how interest expense is recorded by subsidiary.

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Answer 4

Question

Chapter 8, Problem 8.4C

a

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

If the bonds purchased by S were at par or premium.

b

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

if the subsidiary bonds were originally sold at premium or discount, will annual interest payment received by S is more or less than interest expense. How is the difference between interest income recorded by S and how interest expense is recorded by subsidiary.

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Answer 5

Chapter 8, Problem 8.4C

a

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

If the bonds purchased by S were at par or premium.

b

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

if the subsidiary bonds were originally sold at premium or discount, will annual interest payment received by S is more or less than interest expense. How is the difference between interest income recorded by S and how interest expense is recorded by subsidiary.

Answer 6

Chapter 8, Problem 8.4C

a

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

If the bonds purchased by S were at par or premium.

Answer 7

Chapter 8, Problem 8.4C

a

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

If the bonds purchased by S were at par or premium.

Answer 8

b

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

if the subsidiary bonds were originally sold at premium or discount, will annual interest payment received by S is more or less than interest expense. How is the difference between interest income recorded by S and how interest expense is recorded by subsidiary.

Answer 9

b

To determine

Interest income and expense: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements, as a company cannot report an investment in its own bonds or bond liability to itself. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.

if the subsidiary bonds were originally sold at premium or discount, will annual interest payment received by S is more or less than interest expense. How is the difference between interest income recorded by S and how interest expense is recorded by subsidiary.

Answer 10

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Answer 13

Ch. 8 - Prob. 8.1Q Ch. 8 - What is meant by a constructive bond retirement in...Ch. 8 - Prob. 8.3Q Ch. 8 - Prob. 8.4Q Ch. 8 - When a parent company sells land to a subsidiary...Ch. 8 - Prob. 8.7Q Ch. 8 - Prob. 8.8Q Ch. 8 - Prob. 8.9Q Ch. 8 - Prob. 8.10Q Ch. 8 - Prob. 8.11Q

Solution Summary: The author explains that when intercompany sale of bonds takes place between affiliates, all effects of indebtedness must be eliminated for the purpose of consolidated financial statements.

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