Retirement of bonds: when a constrictive retirement occurs, the consolidated income statement for the period reports a gain or loss on retirement, but it is not reported in consolidated balance sheet. If the company purchases the bond of an affiliate from an unrelated party at a price equal to the liability reported, the elimination entries are required to be prepared in consolidated financial statement.
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Retirement of bonds:when a constrictive retirement occurs, the consolidated income statement for the period reports a gain or loss on retirement, but it is not reported in consolidated balance sheet. If the company purchases the bond of an affiliate from an unrelated party at a price equal to the liability reported, the elimination entries are required to be prepared in consolidated financial statement.
Elimination entry for interoperate bond ownership for consolidation worksheet for the year December 31 20X5.
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Retirement of bonds:when a constrictive retirement occurs, the consolidated income statement for the period reports a gain or loss on retirement, but it is not reported in consolidated balance sheet. If the company purchases the bond of an affiliate from an unrelated party at a price equal to the liability reported, the elimination entries are required to be prepared in consolidated financial statement.
The amount on consolidated net income and income to controlling interest to be reported in income statement for 20X5 and 20X6.
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- Suspect Company Issued $720,000 of 8 percent first mortgage bonds on January 1, 20X1, at 105. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $480,000 of Suspect's bonds from the original purchaser on January 1, 20X5, for $473,000. Prime owns 60 percent of Suspect's voting common stock. Required: a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X5. b. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X6. Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements…arrow_forwardSaturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1, 20X3, which Star Corporation purchased. On July 1, 20X7, Pluto Corporation purchased $120,000 face value of Saturn bonds from Star. The bonds pay 12 percent interest annually on December 31. The preparation of consolidated financial statements for Saturn and Pluto at December 31, 20X9, required the following consolidation entry: Bonds Payable Premium on Bonds Payable Interest Income Investment in Saturn Corporation Bonds Interest Expense Investment in Saturn Corporation Stock NCI in NA of Saturn Corp. Multiple Choice Based on the information given above, what amount did Pluto pay when it purchased the bonds on July 1, 20X7? $118.020 $118.920 $118.620 120,000 2,520 14,760 $117.220 118,920 13,560 3,120 1,680arrow_forwardSaturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1, 20X3, which Star Corporation purchased. On July 1, 20X7, Pluto Corporation purchased $120,000 face value of Saturn bonds from Star. The bonds pay 12 percent interest annually on December 31. The preparation of consolidated financial statements for Saturn and Pluto at December 31, 20X9, required the following consolidation entry: Bonds Payable Premium on Bonds Payable Interest Income Investment in Saturn Corporation Bonds Interest Expense Investment in Saturn Corporation Stock NCT in NA of Saturn Corp. Multiple Choice Based on the information given above, what amount of gain or loss on bond retirement is included in the 20X7 consolidated income $6,600 $4,800 16.000 120,000 2,520 14,760 $5,400 118,920 13,560 3,120 1,680arrow_forward
- Packed Corporation owns 70 percent of Snowball Enterprises' stock. On January 1, 20X1, Packed sold $1.13 million par value, 6 percent (paid semiannually), 20-year, first mortgage bonds to Kling Corporation at 98. On January 1, 20X8, Snowball purchased $339,000 par value of the Packed bonds directly from Kling for $336,480. Required: Prepare the consolidation entry needed at December 31, 20X8, to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) X Answer is not complete. Accounts Debit Credit No A Event 1 Bonds payable 339,000 Interest income Loss on constructive bond retirement Investment in Packed Corporation bonds 336,674 Interest expense Discount on bonds payablearrow_forwardOn January 1, 20x1, ABC Co. acquired 10%, P1,000,000 bonds for P827,135. The bonds mature on December 31, 20x3 and pay annual interest every December 31. ABC Co. incurred transaction costs P80,000 on the acquisition. The effective interest rate adjusted for the effect of the transaction costs is 14%. The bonds are to be held under a "hold to collect and sell" business model. Information on fair values is as follows: December 31, 20x1...............98 December 31, 20x2..............102 December 31, 20x3..............100 9.How much is the carrying amount of the investment on December 31, 20x1? a. 935,134 b. 1,002,000 c. 980,000 d. 965,443 10. How much is the unrealized gain (loss) recognized in other comprehensive income on December 31, 20x1? a. 45,866 b. (45,866) c. (37,899) d. 0 11. How much is the interest income recognized in 20x2? a. 126,999 c. 135,088 b. 130,779 d. 144,388arrow_forwardPaka Corporation owns an 80% interest in Sandra Company. Paka acquired Sandra's bonds on January 2, 2014. The following information is from the adjusted trial balances at December 31, 2014, at which time the bonds have three years to maturity. The bonds have interest payment dates of January 1 and July 1. Straight-line amortization is used by both companies. Required:Prepare the necessary consolidation working paper entries on December 31, 2014 with respect to the intercompany bonds.arrow_forward
- Powell Company owns an 80% interest in Sauter, Inc. On January 1, 20X1, Sauter issued $400,000 of 10-year, 12% bonds at a premium of $50,000. On December 31, 20X5, 5 years after original issuance, Powell purchased all of the outstanding bonds for $390,000. Both firms use the straight-line method of amortization. The interest adjustment in the 20X5 subsidiary income distribution schedule is ____. a. $2,000 b. $5,000 c. $4,500 d. $0arrow_forwardPowell Company owns an 80% interest in Sauter, Inc. On January 1, 20X1, Sauter issued $400,000 of 10-year, 12% bonds at a premium of $50,000. On December 31, 20X5, 5 years after original issuance, Powell purchased all of the outstanding bonds for $390,000. Both firms use the straight-line method of amortization. What is the gain on retirement on the 20X5 consolidated income statement? a. $12,500 b. $22,500 c. $10,000 d. $35,000arrow_forwardMidyear purchase of subsidiary’s bonds Sanur Corporation is a 90 percent subsidiary of Pare Corporation. On January 1, 2016, Sanur issued $1,000,000 par, 10 percent 5-year bonds with an unamortized premium of $50,000. On July 1, 2016, Pare Corporation purchased $400,000 par of the outstanding bonds of Sanur for $390,000. Straight-line amortization is used. REQUIRED: Calculate the following: 1. The gain or loss on constructive retirement of the bonds 2. The consolidated bond interest expense for 2016 3. The consolidated bond liability at December 31, 2016arrow_forward
- Harvey Company increased its ownership in Washington Company from 70% to 90% by the purchase of additional shares of the Washington’s outstanding stock from noncontrolling shareholders for a purchase price of $300,000. Immediately prior to the transaction, Harvey’s consolidated balance sheet included a noncontrolling interest balance of $1,000,000.The journal entry by Harvey to record the purchase includes: Select one: A. Cash credit, $333,333 B. APIC credit, $300,000 C. APIC credit, $333,333 D. APIC credit, $33,333arrow_forwardAn entity acquired 10-year bonds at a premium. The investment is measured at amortized cost. Seven years after the acquisition, the entity sold 90% of the bonds at a discount. Which of the following is true? A. Gain is realized on the sale. B. The remaining 10% should be reclassified out of the amortized cost measument category. C. Loss is realized on the sale. D. B and Carrow_forwardG Company is considering the takeover of K Company whereby it will issue 8,000 common shares for all of the outstanding shares of K Company. K Company will become a wholly owned subsidiary of G Company. Prior to the acquisition, G Company had 15,000 shares outstanding, which were trading at $9.70 per share. The following information has been assembled: Current assets Plant assets (net) Current liabilities Long-term debt Common shares Retained earnings Current assets Plant assets (net) Goodwill Investment in K Company Acquisition differential Current liabilities Long-term debt Common shares Retained earnings Carrying Amount $67,500 79,000 $146,500 $ 21,900 24,500 67,000 33,100 $146,500 G Company $ $ Fair Value $57,000 89,000 $ (b) Prepare G Company's consolidated balance sheet immediately after the combination using the worksheet approach and the acquisition method. (Leave no cells blank - be certain to enter "0" wherever required. Values in the first two columns and last column (the…arrow_forward
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