Assume that a Parent company owns 80% of its Subsidiary. The Parent company uses the equity method to account for its Investment in Subsidiary. On January 1, 2019, the Parent company issued to an unaffiliated company $4,000,000 (face) 10 year, 10% bonds payable for a $260,000 premium. The bonds pay interest on December 31 of each year. On January 1, 2022, the Subsidiary acquired 30% of the bonds for $1,040,000. Both companies use straight-line amortization. In preparing the consolidated financial statements for the year ended December 31, 2023, what consolidating entry adjustment is necessary for the beginning-of-year Investment in Subsidiary account balance?
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4-Assume that a Parent company owns 80% of its Subsidiary. The Parent company uses the equity method to account for its Investment in Subsidiary. On January 1, 2019, the Parent company issued to an unaffiliated company $4,000,000 (face) 10 year, 10% bonds payable for a $260,000 premium. The bonds pay interest on December 31 of each year. On January 1, 2022, the Subsidiary acquired 30% of the bonds for $1,040,000.
Both companies use straight-line amortization.
In preparing the consolidated financial statements for the year ended December 31, 2023, what consolidating entry adjustment is necessary for the beginning-of-year Investment in Subsidiary account balance?
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- On 12/31/2020, a parent company purchased the bonds of its subsidiary from the bondholders of the subsidiary for $102,000 cash. The carrying value of the bonds on the general ledger of the subsidiary was $107,000. What amounts will appear on the parent's consolidated balance sheet for 2020? Investment Bonds A) In Bonds Payable $0 $0 Investment Bonds B) In Bonds Payable $102,000 $0 Investment Bonds In Bonds Payable $107,000 $102,000 Investment Bonds D) In Bonds Payable $102,000 $107,000 Investment Bonds E) In Bonds Payable $0 $107,000Panda Company acquired a $20,000 bond originally issued by its 75%-owned subsidiary on January 2, 2015. The bond was issued in a prior year for $21,250, matures January 1, 2020, and pays 8% interest at December 31. The bond's book value at January 2, 2015 is $20,625, and Panda paid $18,500 to purchase it. Straight-line amortization is used by both companies. How much interest income should be eliminated in 2015?3-Assume that a Parent company owns 100% of its Subsidiary. On January 1, 2020 the Parent company had a $2,000,000 (face) bond payable outstanding with a carrying value of $2,140,000. The bond was originally issued to an unaffiliated company. On that same date, the Subsidiary acquired the bond for $1,992,000. During 2020, the Parent company reported $1,260,000 of (pre-consolidation) income from its own operations (i.e. prior to any equity method adjustments by the Parent company) and after recording interest expense. The Subsidiary reported $840,000 of (pre-consolidation) income from its own operations after recording interest income. Related to the bond during 2020, the parent reported interest expense of $220,000 while the subsidiary reported interest income of $190,000. Required: Determine the following amounts that will appear in the 2020 consolidated income statements. a. Interest income from bond investmentb. Interest expense on bond payablec. Gain (loss) on constructive…
- Assume that a Parent company owns 65 percent of its Subsidiary. The parent company uses the equity method to account for its Equity investment. On January 1, 2015, the Parent company issued to an unaffiliated company $1,000,000 (face) 10 year, 10 percent bonds payable for a $50,000 premium. The bonds pay interest on December 31 of each year. On January 1, 2018, the Subsidiary acquired 30 percent of the bonds for $286,000. Both companies use straight-line amortization. In preparing the consolidated financial statements for the year ended December 31, 2019, what consolidating entry adjustment is necessary for the beginning-of-year Equity investment balance?On October 1, 2021, POGI Company purchased 4,000 of the P1,000 face amount, 10% bonds of GANDA Company for P4,462,500 which included accrued interest of P200,000. The bonds which mature on January 1, 2028, pay interest semiannually on January 1 and July 1. The entity used the straight-line method of amortization and appropriately recorded the bonds as financial asset at amortized cost. What is the carrying amount of the bonds on December 31, 2021? Your answerTanner-UNF Corporation acquired as a long-term investment $200 million of 6% bonds, dated July 1, 2024. Assume Tanner-UNF management is holding the bonds as available-for-sale securities. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $210 million. Required: 1. to 3. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2024, interest on December 31, 2024, at the effective (market) rate and the fair value adjustment at December 31. 4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motiving Tanner-UNF to sell the investment on January 2, 2025, for $190 million. Prepare the journal entry to record the sale. Complete this question by entering your answers in the tabs below. Req 1 to 3 Req 4 Suppose Moody's bond rating agency downgraded the risk rating of the bonds…
- Tanner-UNF Corporation acquired as a long-term investment $200 million of 6% bonds, dated July 1, 2024. Assume Tanner-UNF management is holding the bonds in a trading portfolio. Tanner-UNF paid $200 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $210 million. Required: 1. to 3. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2024, interest on December 31, 2024, at the effective (market) rate and the fair value adjustment at December 31. 4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motiving Tanner-UNF to sell the investment on January 2, 2025, for $190 million. Prepare the journal entry to record the sale. Comple this question by entering your wers in the tabs below. Req 1 to 3 Suppose Moody's bond rating agency downgraded the risk rating of the bonds motiving Tanner-UNF to…Tanner-UNF Corporation acquired as a long-term investment $260.0 million of 7.0 % bonds, dated July 1, on July 1, 2024. Company management has the positive intent and ability to hold the bonds until maturity. Tanner-UNF paid $260.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $240.0 million. Required: 1. How will Tanner-UNF's investment in the bonds on July 1, 2024 affect the financial statements? 2. How will Tanner-UNF's receipt of interest on December 31, 2024, affect the financial statements? 3. At what amount will Tanner-UNF report its investment in the December 31, 2024, balance sheet? 4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2025, for $220.0 million. How will the sale of the bond investment affect Tanner-UNF's financial statements?…Parent owns 100% of subsidiary. Subsidiary has bonds payable to third parties of $5,500,000., plus an unamortized premium with a credit balance of $500,000. In 2022, parent purchases all outstanding bonds from third parties for $6,400,000. What result is reported in the 2022 consolidated financial statements. a. Consolidated loss on “retirement” of bonds $400,000 b. No gain or loss is reported in the consolidated totals on this intercompany transaction. c. Consolidated loss on “retirement” of bonds of $1,400,000 d. Consolidated gain on “retirement” of bonds of $1,100,000 e. Consolidated gain on “retirement” of bonds of $400,000
- A Company acquired the assets and assumed the liabilities of B Inc. on June 30, 2022. The consideration transferred by the acquirer were as follows: • Cash amounting to P2,000,000. • Issued 10,000 ordinary shares at P10 par with a market price of P15. • Issued 5 year interest bearing bonds payable with a face value of P3,000,000 with a nominal rate of 10% and effective interest of 12%. (use two decimal places for the present value factor) Acquisition related costs incurred were as follows: • Legal fees amounting to P120,000, 70% of which is not yet paid. • Share issue costs paid amounted to P15,000. • Bond Issue costs paid amounting to P120,000. The Balance Sheet of the two entities before acquisition were as follows: A Company B Inc.Total Assets 16,500,000 5,235,000Total Liabilities 2,500,000 500,000Ordinary Shares 5,000,000 1,250,000Share premium 1,500,000 750,000Retained Earnings 6/30/22 7,500,000 2,735,000It was determined that the book value of the assets and liabilities of the…A Parent Company owns 100 percent of its Subsidiary. During 2021, the Parent company reports net income (by itself, without any investment income from its Subsidiary) of $1,840,000 and the subsidiary reports net income of $736,000. The parent had a bond payable outstanding on December 31, 2021, with a carrying value equal to $1,545,600. The Subsidiary acquired the bond on December 31, 2021, for $1,453,600. During 2021, the Parent reported interest expense (related to the bond) of $128,800 while the Subsidiary reported no interest income (related to the bond). What is consolidated net income for the year ended December 31, 2021? b. $2,668,000 d. $2,796,800On 30 June 2022, Southside Ltd purchased 5000 corporate bonds in ABC Ltd at $10.00 per bond. On acquisition, Southside Ltd classified this investment in financial assets as being ‘measured at fair value through other comprehensive income’. At 30 June 2023, the fair value of the corporate bonds had increased to $14.00. At 30 June 2024 the fair value of the corporate bonds had decreased to $13.00. All of the corporate bonds were sold on 30 June 2024. At 30 June 2022, the only equity item was paid-up capital of $100 000. And this has not changed. The applicable tax rate is 30 per cent.REQUIREDPrepare an extract of the statement of profit or loss and other comprehensive income, and statement of changes in equity, for the reporting period ending 30 June 2024 in which the reclassification adjustment for financial assets measured at fair value through other comprehensive income is detailed.