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

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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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
Transcribed Image Text: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✔
Transcribed Image Text: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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