Paulina, Incorporated, owns 90 percent of Southport Company. On January 1, 2021, Paulina acquires half of Southport's $500,000 outstanding 13-year bonds. These bonds had been sold on the open market on January 1, 2018, at a 12 percent effective rate. The bonds pay a cash interest rate of 10 percent every December 31 and are scheduled to come due on December 31, 2030. Southport issued this debt originally for $435,765. Paulina paid $283,550 for this investment, indicating an 8 percent effective yield. Assuming that both parties use the straight-line method, what consolidation entry would be required on December 31, 2021, because of these bonds? Assume that the parent is not applying the equity method. Assuming that both parties use the straight-line method, what consolidation entry would be required on December 31, 2021, because of these bonds? Assume that the parent is not applying the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answers to the nearest dollar amount.) No 1 Transaction 1 Bonds payable Retained earnings Interest income Accounts Investment in Southport Bonds Interest expense Show Transcribed Text Ć 00000 Debit 229,561 X 20,806 X 56,909 X Credit Show less A 27,920 X 279,356
Paulina, Incorporated, owns 90 percent of Southport Company. On January 1, 2021, Paulina acquires half of Southport's $500,000 outstanding 13-year bonds. These bonds had been sold on the open market on January 1, 2018, at a 12 percent effective rate. The bonds pay a cash interest rate of 10 percent every December 31 and are scheduled to come due on December 31, 2030. Southport issued this debt originally for $435,765. Paulina paid $283,550 for this investment, indicating an 8 percent effective yield. Assuming that both parties use the straight-line method, what consolidation entry would be required on December 31, 2021, because of these bonds? Assume that the parent is not applying the equity method. Assuming that both parties use the straight-line method, what consolidation entry would be required on December 31, 2021, because of these bonds? Assume that the parent is not applying the equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answers to the nearest dollar amount.) No 1 Transaction 1 Bonds payable Retained earnings Interest income Accounts Investment in Southport Bonds Interest expense Show Transcribed Text Ć 00000 Debit 229,561 X 20,806 X 56,909 X Credit Show less A 27,920 X 279,356
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Paulina, Incorporated, owns 90 percent of Southport Company. On January 1, 2021, Paulina acquires half of Southport's
$500,000 outstanding 13-year bonds. These bonds had been sold on the open market on January 1, 2018, at a 12 percent
effective rate. The bonds pay a cash interest rate of 10 percent every December 31 and are scheduled to come due on
December 31, 2030. Southport issued this debt originally for $435,765. Paulina paid $283,550 for this investment,
indicating an 8 percent effective yield.
Assuming that both parties use the straight-line method, what consolidation entry would be required on December 31,
2021, because of these bonds? Assume that the parent is not applying the equity method.
Assuming that both parties use the straight-line method, what consolidation entry would be required on December 31, 2021,
because of these bonds? Assume that the parent is not applying the equity method. (If no entry is required for a
transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final
answers to the nearest dollar amount.)
No
1
Transaction
1
Bonds payable
Retained earnings
Interest income
Accounts
Investment in Southport Bonds
Interest expense
Show Transcribed Text
33333
Debit
229,561 X
20,806 X
56,909 X
Credit
Show less
27,920 x
279,356
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