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4. Culver owns 80 percent of the common stock of Fowler Company. Culver also purchases some of Fowler's bonds directly from Fowler and holds the
4. Culver owns 80 percent of the common stock of Fowler Company. Culver also purchases some of Fowler's bonds directly from Fowler and holds the bonds as a long-term investment. How is the acquisition of the repurchased bonds treated for consolidated reporting purposes? A) As a retirement of bonds. B) As an increase in the Bonds Payable account on Fowler's books. As an increase in noncurrent assets. D) Everything related to the bonds is eliminated in the consolidation workpaper, and nothing related to the bonds appears in the consolidated financial statements. alors on the 5. If the interest income and interest expense resulting from a direct intercompany debt transfer are not eliminated when preparing consolidated financial statements, the result will be: Overstatement of Overstatement of Consolidated Consolidated Interest Income Retained Earnings Yes Yes Yes No No Yes No No D) b 6. When a subsidiary purchases bonds of its parent from an unrelated party, the difference between the bond carrying amount on the parent's books and the purchase price paid by the subsidiary, if material, is reflected in the consolidated financial statements in the year of purchase as: A) a premium or discount on the bond investment. B) an unusual but not extraordinary gain or loss. a "constructive retirement gain or loss. D) a footnote disclosure only
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