Advanced Financial Accounting
11th Edition
ISBN: 9780078025877
Author: Theodore E. Christensen, David M Cottrell, Cassy JH Budd Advanced Financial Accounting
Publisher: McGraw-Hill Education
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Chapter 8, Problem 8.5A.4E
To determine
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
Bond: Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.
To choose: The correct answer.
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Pretzel Corporation owns 60 percent of Stick Corporation's voting shares. On January 1, 20X2, Pretzel Corporation sold
$150,000 par value, 6 percent first mortgage bonds to Stick for $156,000. The bonds mature in 10 years and pay
interest semiannually on January 1 and July 1.
Note: Assume using straight-line amortization of bond discount or premium.
Required:
a. Prepare the journal entries for 20X2 for Stick related to its ownership of Pretzel's bonds. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.)
View transaction list
Journal entry worksheet
1
2
3
Record the investment in the bonds of Pretzel
Corporation.
Note: Enter debits before credits.
Date
January 1,
20X2
General Journal
Debit
Credit
Record entry
View general journal
Clear entry
>
b. Prepare the journal entries for 20X2 for Pretzel related to the bonds. (If no entry is required for a transaction/event,
select "No journal entry required" in the first account…
Pretzel Corporation owns 60 percent of Stick Corporation's voting shares. On January 1, 20X2, Pretzel Corporation sold $160,000 par
value, 10 percent first mortgage bonds to Stick for $166,000. The bonds mature in 10 years and pay interest semiannually on January 1
and July 1.
Required:
a. Prepare the journal entries for 20X2 for Stick related to its ownership of Pretzel's bonds.
b. Prepare the journal entries for 20X2 for Pretzel related to the bonds.
c. Prepare the worksheet consolidation entries needed on December 31, 20X2, to remove the effects of the intercorporate ownership
of bonds.
Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required A
Required B
Required C
Prepare the worksheet consolidation entries needed on December 31, 20X2, to remove the effects of the intercorporate
ownership of bonds.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do…
Pretzel Corporation owns 60 percent of Stick Corporation's voting shares. On January 1, 20X2, Pretzel Corporation sold $160,000 par
value, 10 percent first mortgage bonds to Stick for $166,000. The bonds mature in 10 years and pay interest semiannually on January 1
and July 1.
Required:
a. Prepare the journal entries for 20X2 for Stick related to its ownership of Pretzel's bonds.
b. Prepare the journal entries for 20X2 for Pretzel related to the bonds.
c. Prepare the worksheet consolidation entries needed on December 31, 20X2, to remove the effects of the intercorporate ownership
of bonds.
Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required A Required B
Required C
Prepare the jourxial entries for 20X2 for Stick related to its ownership of Pretzel's bonds.
Note: 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.…
Chapter 8 Solutions
Advanced Financial Accounting
Ch. 8 - Prob. 8.1QCh. 8 - What is meant by a constructive bond retirement in...Ch. 8 - Prob. 8.3QCh. 8 - Prob. 8.4QCh. 8 - When a parent company sells land to a subsidiary...Ch. 8 - Prob. 8.7QCh. 8 - Prob. 8.8QCh. 8 - Prob. 8.9QCh. 8 - Prob. 8.10QCh. 8 - Prob. 8.11Q
Ch. 8 - How is the amount of income assigned to the...Ch. 8 - Prob. 8.13QCh. 8 - How would the relationship between interest income...Ch. 8 - Prob. 8.15QCh. 8 - Prob. 8.16QCh. 8 - Prob. 8.17QCh. 8 - Prob. 8.18QCh. 8 - Prob. 8.1CCh. 8 - Prob. 8.2CCh. 8 - Prob. 8.4CCh. 8 - Prob. 8.1ECh. 8 - Prob. 8.1AECh. 8 - Prob. 8.2ECh. 8 - Prob. 8.2AECh. 8 - Prob. 8.3ECh. 8 - Prob. 8.3AECh. 8 - Prob. 8.4ECh. 8 - Prob. 8.5.1ECh. 8 - Prob. 8.5.2ECh. 8 - MultipleChoice Questions (Effective Interest...Ch. 8 - Prob. 8.5.4ECh. 8 - Prob. 8.5.5ECh. 8 - Prob. 8.5.6ECh. 8 - Prob. 8.5A.1ECh. 8 - Prob. 8.5A.2ECh. 8 - Prob. 8.5A.3ECh. 8 - Prob. 8.5A.4ECh. 8 - Prob. 8.6.1ECh. 8 - Prob. 8.6.2ECh. 8 - MultipleChoice Questions (Effective Interest...Ch. 8 - Prob. 8.6A.1ECh. 8 - Prob. 8.6A.2ECh. 8 - Prob. 8.6A.3ECh. 8 - Prob. 8.7ECh. 8 - Prob. 8.7AECh. 8 - Prob. 8.8ECh. 8 - Prob. 8.8AECh. 8 - Retirement of Bonds Sold at a Discount (Effective...Ch. 8 - Prob. 8.9AECh. 8 - Prob. 8.10ECh. 8 - Prob. 8.10AECh. 8 - Prob. 8.11ECh. 8 - Prob. 8.11AECh. 8 - Evaluation of Bond Retirement (Effective Interest...Ch. 8 - Prob. 8.12AECh. 8 - Prob. 8.13ECh. 8 - Prob. 8.13AECh. 8 - Prob. 8.14PCh. 8 - Prob. 8.15PCh. 8 - Prob. 8.15APCh. 8 - Prob. 8.16PCh. 8 - Prob. 8.16APCh. 8 - Prob. 8.17PCh. 8 - Prob. 8.17APCh. 8 - Prob. 8.18PCh. 8 - Prob. 8.18APCh. 8 - Prob. 8.19APCh. 8 - Prob. 8.20PCh. 8 - Prob. 8.20APCh. 8 - Prob. 8.21PCh. 8 - Prob. 8.21APCh. 8 - Prob. 8.22BPCh. 8 - Prob. 8.22APCh. 8 - Prob. 8.23PCh. 8 - Prob. 8.24PCh. 8 - Prob. 8.25PCh. 8 - Prob. 8.25APCh. 8 - Prob. 8.26PCh. 8 - Prob. 8.26APCh. 8 - Prob. 8.27B.1PCh. 8 - Prob. 8.27B.2PCh. 8 - Prob. 8.27B.3PCh. 8 - Prob. 8.27B.4PCh. 8 - Prob. 8.27B.5PCh. 8 - Prob. 8.27B.6PCh. 8 - Prob. 8.27B.7PCh. 8 - Prob. 8.27B.8PCh. 8 - Prob. 8.27B.9PCh. 8 - Prob. 8.27B.10PCh. 8 - Prob. 8.28PCh. 8 - Prob. 8.28APCh. 8 - Prob. 8.29BPCh. 8 - Prob. 8.30BP
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- Suspect Company issued $1,110,000 of 8 percent first mortgage bonds on January 1, 20X1, at 104. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $740,000 of Suspect’s bonds from the original purchaser on December 31, 20X5, for $736,000. Prime owns 70 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.arrow_forwardHardevarrow_forwardManjiarrow_forward
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- Pretzel Corporation owns 60 percent of Stick Corporation’s voting shares. On January 1, 20X2, Pretzel Corporation sold $180,000 par value, 6 percent first mortgage bonds to Stick for $185,000. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1 Required Prepare the journal entries for 20X2 for Stick related to its ownership of Pretzel’s bonds. Prepare the journal entries for 20X2 for Pretzel related to the bonds. Prepare the worksheet consolidation entries needed on December 31, 20X2, to remove the effects of the intercorporate ownership of bondsarrow_forwardPLEASE SHOW DETAILED STEPSarrow_forwardN2.arrow_forward
- Suspect Company Issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay Interest semiannually on January 1 and July 1. Prime Corporation purchased $400,000 of Suspect's bonds from the original purchaser on December 31, 20X5, for $397,000. Prime owns 60 percent of Suspect's voting common stock. Note: Assume using straight-line amortization of bond discount or premium. 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. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) Answer is complete and correct. No Event A 1 Bonds payable Premium on bonds payable Accounts Debit Credit 400,000 9,000 Investment in Suspect Company bonds Gain on bond retirement 397,000 12,000 B 2 Interest payable Interest receivable 18,000 18,000 b. Prepare the…arrow_forwardSuspect Company issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $400,000 of Suspect's bonds from the original purchaser on December 31, 20X5, for $397,000. Prime owns 60 percent of Suspect's voting common stock. Note: Assume using straight-line amortization of bond discount or premium. 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. 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…arrow_forward3carrow_forward
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