MC$1)$ If the price paid by a parent company to acquire the debt of a subsidiary is greater than the book value of the liability, a $\_\_\_\_\_\_\_\_$ occurs. $(2$ pts$.)$

A$)$ realized loss on the retirement of debt from the viewpoint of the subsidiary

B$)$ realized gain on the retirement of debt from the viewpoint of the subsidiary

C$)$ constructive loss on the retirement of debt from the viewpoint of the consolidated entity

D$)$ constructive gain on the retirement of debt from the viewpoint of the consolidated entity

MC$2.)$Pascalian Company owns a $90\%$ interest in Sapp Company. On January $1,2013,$ Pascalian had $$300,000,6\%$ bonds outstanding with an unamortized premium of $$9,000.$ The bonds mature on December $31,2017.$ Sapp acquired one$-$third of Pascalian's bonds in the open market for $$97,000$ on January $1,2013.$ Both companies use straight$-$line amortization of bond discounts$/$premiums$.$ Interest is paid on December $31.$

The gain from the bond purchase that appeared on the December $31,2013$ consolidated income statement was: $(4$ pts$.)$

A$)$ $$4,320.$

B$)$ $$4,800.$

C$)$ $$5,400.$

D$)$ $$6,000.$

MC$3.)$ Under GAAP, the $\_\_\_\_\_\_\_\_$ will include the variable interest entity in consolidated financial statements. $(2$ pts$.)$

A$)$ special purpose entity

B$)$ limited liability company

C$)$ trust

D$)$ primary beneficiary

MC$4.)$ With regard to a variable interest entity $($VIE$),$ Ann Company may meet the following two conditions: $(2$ pts$.)$

Condition I

Ann Company has the power to direct VIE activities that significantly impact VIE's economic performance.

Condition II

Ann Company has an obligation to absorb losses and$/$or a right to receive significant benefits from the VIE.

Ann Company must consolidate a VIE if

A$)$ Condition I is met only.

B$)$ Condition II is met only.

C$)$ either Condition I or Condition II is met.

D$)$ both Condition I and Condition II are met.