14. Debt investments are initially recorded at:

(a) cost.

(b) cost plus accrued interest.

(c) fair value.

(d) face value.

15. Which of the following statements about intercompany eliminations is true?

(a) They are not journalized or posted by any of the subsidiaries.

(b) They do not affect the ledger accounts of any of the subsidiaries.

(c) They are made solely on the worksheet to arrive at correct consolidated data.

(d) All of these statements are true.

16. Which one of the following statements about consolidated income statements is false?

(a) A worksheet facilitates the preparation of the statement.

(b) The consolidated income statement shows the results of operations of affiliated companies as a single economic unit.

(c) All revenue and expense transactions between parent and subsidiary companies are eliminated.

(d) When a subsidiary is wholly owned, the form and content of the statement will differ from the income statement of an individual corporation.

17. On June 10, Tuzun Company purchased $8,000 of merchandise from Epps Company, FOB shipping point, terms 2/10, n/30. Tuzun pays the freight costs of $400 on June 11. Damaged goods totaling $300 are returned to Epps for credit on June 12. The fair value of these goods is $70. On June 19, Tuzun pays Epps Company in full, less the purchase discount. Both companies use a perpetual inventory system.

Instructions

(a) Prepare separate entries for each transaction on the books of Tuzun Company.

(b) Prepare separate entries for each transaction for Epps Company. The merchandise purchased by Tuzun on June 10 had cost Epps $4,800.