On January 1 of the current year, the Barton Corporation issued 10% bonds with a face value of $200,000.The bonds are sold for $191,000.The bonds pay interest semiannually on June 30 and December 31 and the maturity date is December 31, five years from now.Barton records straight-line amortization of the bond discount.The bond interest expense for the year ended December 31 is

a. $18,200

b. $29,000

c. $21,800

d. $10,900

On the first day of the fiscal year, Lisbon Co. issued $1,000,000 of 10-year, 7% bonds for $1,050,000, with interest payablesemiannually.OrangeInc. purchased the bonds on the issue date for the issue price.The journal entry to record the amortization of the premium (by the straight-line method) for the year by Lisbon Co. includes a debit to

a. Premium on Bonds Payable for $2,500

b. Premium on Bonds Payable for $5,000

c. Interest Expense for $2,500

d. Interest Expense for $5,000

The primary objectives of investing in temporary investments is to

a.receive dividends

b.realize gains from increases in market price of the securities

c.earn interest revenue

d.all of these

The corporation owning all or a majority of the voting stock of another corporation is known as the parent company.

True

False

In general, consolidated financial statements should be prepared

a. when a corporation owns more than 20% and less than 40% of the common stock of another company

b. when a corporation owns more than 50% of the common stock of another company

c. only when a corporation owns 100% of the common stock of another company

d. whenever the market value of the stock investment is significantly lower than its cost

Which of the following statements isnota reason a company may purchase another company's stock?

a. gaining control of another company's operations

b. developing or maintaining business relationships

c. earning a return on excess cash

d. sustain the other company's stock price

On April 1, Alliance Company purchased $50,000 of Tetter Company's 12% bonds at 100 plus accrued interest of $2,000. On June 30, Alliance received its first semiannual interest.On February 1, Alliance sold $40,000 of the bonds at 103 plus accrued interest.The journal entry Alliance will record on April 1 for the purchase of the bonds will include a

a. debit to InvestmentsTetter Company Bonds for $50,000

b. debit for Cash of $50,000

c. debit to InvestmentsTetter Company Bonds for $52,000

d. credit to Interest Payable for $2,000

The method of accounting for investments in equity securities in which the investor records its share of periodic net income of the investee is the

a. income method

b. equity method

c. market method

d. cost method

The higher the number of times interest charges are earned ratio, the better the creditors' protection.

True

False

If one company owns more than 50% of the common stock of another company

a. a partnership exists

b. the company whose stock is owned must be liquidated

c. a parent-subsidiary relationship exists

d. the cost method should be used to account for the investment