Cairns owns 75 percent of the voting stock of Hamilton, Inc. 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.
Cairns owns 75 percent of the voting stock of Hamilton, Inc. 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cairns owns 75 percent of the voting stock of Hamilton, Inc. 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, 2017, Hamilton sold $1,700,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate
of 10 percent payable every December 31. Cairns acquired 35 percent of these bonds at 96 percent of face value on
January 1, 2019. Both companies utilize the straight-line method of amortization.
Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following
dates. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
a. December 31, 2019
b. December 31, 2020
c. December 31, 2021
No
1
2
3
Date
December 31, 201 Bonds payable
Premium on bonds payable
Interest income
Answer is not complete.
Accounts
Investment in bonds
Interest expense
Gain on retirement of bonds
December 31, 202 Bonds payable
Premium on bonds payable
Interest income
Investment in bonds
Investment in Hamilton
December 31, 202 Bonds payable
Premium on bonds payable
Interest income
Investment in bonds
Interest expense
Investment in Hamilton
Duu
H
Mard
Debit
595,000
20,825
Credit
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