Cairns owns 70 percent of the voting stock of Hamilton, Incorporated. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2020, Hamilton sold $1,300,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 8 percent payable every December 31. Cairns acquired 40 percent of these bonds at 96 percent of face value on January 1, 2022. Both companies utilize the straight-line method of amortization. Required: Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. a. December 31, 2022 b. December 31, 2023 c. December 31, 2024 view transaction list transaction list No Date 1 December 31, 2022 Bonds payable Premium on bonds payable Interest income Investment in bonds Interest expense Gain on retirement of bonds 2 December 31, 2023 Bonds payable Premium on bonds payable Interest income Investment in bonds Interest expense Investment in Hamilton Accounts Debit Credit 520,000 18,200 44,200 501,800 39,000 41,600 520,000 15,600 44,200 504,400 39,000 36,400 3 December 31, 2024 Bonds payable 520,000 Premium on bonds payable Interest income 44,200 Investment in bonds Interest expense Investment in Hamilton 39,000
Cairns owns 70 percent of the voting stock of Hamilton, Incorporated. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2020, Hamilton sold $1,300,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 8 percent payable every December 31. Cairns acquired 40 percent of these bonds at 96 percent of face value on January 1, 2022. Both companies utilize the straight-line method of amortization. Required: Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. a. December 31, 2022 b. December 31, 2023 c. December 31, 2024 view transaction list transaction list No Date 1 December 31, 2022 Bonds payable Premium on bonds payable Interest income Investment in bonds Interest expense Gain on retirement of bonds 2 December 31, 2023 Bonds payable Premium on bonds payable Interest income Investment in bonds Interest expense Investment in Hamilton Accounts Debit Credit 520,000 18,200 44,200 501,800 39,000 41,600 520,000 15,600 44,200 504,400 39,000 36,400 3 December 31, 2024 Bonds payable 520,000 Premium on bonds payable Interest income 44,200 Investment in bonds Interest expense Investment in Hamilton 39,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Cairns owns 70 percent of the voting stock of Hamilton, Incorporated. The parent's interest was acquired several years ago on the
date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition.
Cairns uses the equity method in its internal records to account for its investment in Hamilton.
On January 1, 2020, Hamilton sold $1,300,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 8 percent
payable every December 31. Cairns acquired 40 percent of these bonds at 96 percent of face value on January 1, 2022. Both
companies utilize the straight-line method of amortization.
Required:
Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
a. December 31, 2022
b. December 31, 2023
c. December 31, 2024
view transaction list
transaction list
No
Date
1
December 31, 2022 Bonds payable
Premium on bonds payable
Interest income
Investment in bonds
Interest expense
Gain on retirement of bonds
2
December 31, 2023 Bonds payable
Premium on bonds payable
Interest income
Investment in bonds
Interest expense
Investment in Hamilton
Accounts
Debit
Credit
520,000
18,200
44,200
501,800
39,000
41,600
520,000
15,600
44,200
504,400
39,000
36,400
3
December 31, 2024 Bonds payable
520,000
Premium on bonds payable
Interest income
44,200
Investment in bonds
Interest expense
Investment in Hamilton
39,000
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