Suspect Company Issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years andpay Interest semiannually on January 1 and July 1. Prime Corporation purchased $400,000 of Suspect's bonds from the originalpurchaser on December 31, 20X5, for $397,000. 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 Inpreparing consolidated financial statements for 20X5. (If no entry is required for a transaction/event, select "No Journal entryrequired" In the first account fleld. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.)NoABNoAEvent1B2Event12Bonds payablePremium on bonds payableInvestment in Suspect Company bondsGain on bond retirementInterest payableAnswer is complete but not entirely correct.AccountsInterest receivableb. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership Inpreparing consolidated financial statements for 20X6. (If no entry is required for a transaction/event, select "No Journal entryrequired" in the first account fleld. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.)Interest payableAnswer is not complete.Bonds payablePremium on bonds payableInterest incomeInvestment in Suspect Company bondsInterest receivableAccountsDebit400,0009,00018,000Debit400,0008,400Credit18,000397,0009,00018,000Credit6,750 x397,20018,000

Corporate Bonds -Corporate bonds are obligations that corporations issue to both public and private…

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. (If no entry is required for a transaction/event, select "No lournal entry

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. (If no entry is required for a transaction/event, select "No lournal entry

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

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.
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 fleld. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.)
No
A
B
No
A
Event
1
B
2
Event
1
2
Bonds payable
Premium on bonds payable
Investment in Suspect Company bonds
Gain on bond retirement
Interest payable
Answer is complete but not entirely correct.
Accounts
Interest receivable
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. (If no entry is required for a transaction/event, select "No Journal entry
required" in the first account fleld. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.)
Interest payable
Answer is not complete.
Bonds payable
Premium on bonds payable
Interest income
Investment in Suspect Company bonds
Interest receivable
Accounts
Debit
400,000
9,000
18,000
Debit
400,000
8,400
Credit
18,000
397,000
9,000
18,000
Credit
6,750 x
397,200
18,000

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