Several years ago Brant, Inc., sold $960,000 in bonds to the public. Annual cash interest of 9 percent ($86,400) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2013, Zack Corporation (a wholly owned subsidiary of Brant) purchased $120,000 of these bonds on the open market for $141,000, a price based on an effective interest rate of 7 percent. The bond liability had a book value on that date of $820,000. Assume Brant uses the equity method to account internally for its investment in Zack. а. & b. What consolidation entry would be required for these bonds on December 31, 2013 and December 31, 2015?

Several years ago Brant, Inc., sold $960,000 in bonds to the public. Annual cash interest of 9 percent ($86,400) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2013, Zack Corporation (a wholly owned subsidiary of Brant) purchased $120,000 of these bonds on the open market for $141,000, a price based on an effective interest rate of 7 percent. The bond liability had a book value on that date of $820,000. Assume Brant uses the equity method to account internally for its investment in Zack. а. & b. What consolidation entry would be required for these bonds on December 31, 2013 and December 31, 2015?

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 5E

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