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?
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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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