1, When the subsidiary sells a depreciable asset to the parent.

a. The total amount of the gain or loss on sale (= selling price book value on date of sale) has to be eliminated in the consolida6on worksheet every year.

b. Every year, the asset will be shown on the consolidated balance sheet at its fair value at the end of the current year.

c. None of these statements is correct.

d. The gain or loss on sale of the asset will be realized gradually over the remaining life of the asset.

2, If American Company sells the equipment to outsiders in 2023, the remaining balance of the gain on the 2020 sale of the equipment from California Company to American Company will be ________.

a. recognized (i.e., added) in California Company's income distribu6on schedule for 2023.

b. lost and cannot be recognized anymore.

c. recognized gradually over 2023 and 2024 as if American Company s6ll owned the equipment.

d. None of these.

3, Which of the following is a characteris:c of partnerships?

a. General partners have unlimited liability for the obliga6ons of the partnership. b. Partnership income is allocated to partners who pay individual income taxes on their

own incomes.

c. All of these are characteris6cs of partnerships.

d. A partnership can apply the Generally Accepted Accoun6ng Principles (GAAP) or Other Comprehensive Bases of Accoun6ng (OCBOA).

4. Which of the following determines the type of a partnership?

a. The presence of a general partner b. The presence of a limited partner c. The details of the profit and loss sharing agreement d. The total number of partners

Philadelphia Company (parent) owns 80% of the common stock of Seaele Company (subsidiary). On January 1 , 2020, Seaele Company issued $200,000 of 10-year 8% bonds at face value. Interest is payable on January 1 each year. On January 2 , 2022, Philadelphia Company purchased 100% of these bonds from outsider bondholders for $208,000.

5. On the consolida:on worksheet for 2022, the entry (or entries) to eliminate the intercompany bonds payable would include which of the following?

Debit Bonds Payable $207,000

Credit Investment in Seacle's Bonds $208,000

Debit Loss on Bond Re6rement $8,000

All of these. gpt

6, Philadelphia Companys income distribu:on schedule for 2022 would include which of the following adjustments to net income?

Deduc6on of $8,000 loss on re6rement of bonds.

Addi6on of $8,000 gain o re6rement of bonds.

Deduc6on of $1,000 interest adjustment.

Addi6on of $1,000 interest adjustment.

None of these.

7, Lopez Company owns 90% of the common stock of Nguyen Company. During 2019, Nguyen company issued a $10,000, 2 year note payable to Lopez Company. Aberwards, Lopez Company discounted (i.e., sold) the note at an outsider bank. Which of the following accounts related to the note will be shown on the consolidated financial statements for 2019?

Notes Receivable

Interest Payable

Interest Revenue

Interest Receivable