Purse Corporation owns 70 percent of Scarf Company's voting shares. On January 1, 20X3, Scarf sold bonds with a par value of$600,000 at 98. Purse purchased $400,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in fiveyears and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1.Required:a. What amount of interest expense should be reported in the 20X4 consolidated income statement? (Do not round yourintermediate calculations. Round your final answer to nearest whole dollar.)Answer is complete but not entirely correct.Interest expense $ 16,800 x b. Prepare the journal entries Purse recorded during 20X4 with regard to its investment in Scarf bonds. (If no entry is required for atransaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Roundyour final answers to nearest whole dollar.)NoABNo123DateJanuary 1, 20X4July 1, 20X4CashEvent1Interest receivable2CashDecember 31, 20X Interest receivableInvestment in Scarf Company bondsInterest incomeBonds payableInterest incomeAnswer is not complete.General JournalInterest payableInvestment in Scarf Company bondsBond discountInterest expenseInterest receivable3 3c. Prepare all worksheet consolidation entries needed to remove the effects of the intercorporate bond ownership in preparingconsolidated financial statements for 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in thefirst account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.)Answer is complete but not entirely correct.Accounts< Prev✓3 of 6 ⠀>0 0 0 0 0→→DebitNext >16,000✔16,00016,000Debit400,000✔ⓇCredit16,000✔16,0001 xCredit395,200✔1 x1 xReturn to question16,000✔

A journal entry records a business transaction in the accounting system of a company. Journal…

event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) No 1 2 3 Date January 1, 20X4 July 1, 20X4 Cash Interest receivable Cash Answer is not complete. December 31, 20X Interest receivable General Journal Investment in Scarf Company bonds Interest income Debit 16,000 16,000 16,000 Credit 16,000 1 1 X X Return to questi Prepare all worksheet consolidation entries needed to remove the effects of the intercorporate bond ownership in preparing onsolidated financial statements for 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the

event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) No 1 2 3 Date January 1, 20X4 July 1, 20X4 Cash Interest receivable Cash Answer is not complete. December 31, 20X Interest receivable General Journal Investment in Scarf Company bonds Interest income Debit 16,000 16,000 16,000 Credit 16,000 1 1 X X Return to questi Prepare all worksheet consolidation entries needed to remove the effects of the intercorporate bond ownership in preparing onsolidated financial statements for 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 15MCQ

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Concept explainers

Bad Debts

At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.

Accounts Receivable

The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.

Question

Purse Corporation owns 70 percent of Scarf Company's voting shares. On January 1, 20X3, Scarf sold bonds with a par value of
$600,000 at 98. Purse purchased $400,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in five
years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1.
Required:
a. What amount of interest expense should be reported in the 20X4 consolidated income statement? (Do not round your
intermediate calculations. Round your final answer to nearest whole dollar.)
Answer is complete but not entirely correct.
Interest expense $ 16,800 x

b. Prepare the journal entries Purse recorded during 20X4 with regard to its investment in Scarf bonds. (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. Round
your final answers to nearest whole dollar.)
No
A
B
No
1
2
3
Date
January 1, 20X4
July 1, 20X4
Cash
Event
1
Interest receivable
2
Cash
December 31, 20X Interest receivable
Investment in Scarf Company bonds
Interest income
Bonds payable
Interest income
Answer is not complete.
General Journal
Interest payable
Investment in Scarf Company bonds
Bond discount
Interest expense
Interest receivable
3 3
c. Prepare all worksheet consolidation entries needed to remove the effects of the intercorporate bond ownership in preparing
consolidated financial statements for 20X4. (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. Round your final answers to nearest whole dollar.)
Answer is complete but not entirely correct.
Accounts
< Prev
✓
3 of 6 ⠀
>
0 0 0 0 0
→
→
Debit
Next >
16,000✔
16,000
16,000
Debit
400,000✔
Ⓡ
Credit
16,000✔
16,000
1 x
Credit
395,200✔
1 x
1 x
Return to question
16,000✔

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