Plug Corporation purchased $100,000 par value bonds of its subsidiary, Spark Company, on December 31, 20X5, from Lemon Corporation for $102,800. The 10-year bonds bear a 9 percent coupon rate, and Spark originally sold them on January 1, 20X3, to Lemon at 95. Interest is paid annually on December 31. Plug owns 85 percent of the stock of Spark. In preparing the consolidation worksheet at December 31, 20X6, Plug's controller made the following entry to eliminate the effects of the intercorporate bond ownership: Consolidation Worksheet Entries Bonds Payable Interest Income Retained Earnings, January 1 Noncontrolling Interest Investment in Spark Company Bonds Discount on Bonds Payable Interest Expense Debit 100,000 8,691 5,741 1,013 Required: With the information given, answer the following questions: Credit 102,491 3,535 9,419
Plug Corporation purchased $100,000 par value bonds of its subsidiary, Spark Company, on December 31, 20X5, from Lemon Corporation for $102,800. The 10-year bonds bear a 9 percent coupon rate, and Spark originally sold them on January 1, 20X3, to Lemon at 95. Interest is paid annually on December 31. Plug owns 85 percent of the stock of Spark. In preparing the consolidation worksheet at December 31, 20X6, Plug's controller made the following entry to eliminate the effects of the intercorporate bond ownership: Consolidation Worksheet Entries Bonds Payable Interest Income Retained Earnings, January 1 Noncontrolling Interest Investment in Spark Company Bonds Discount on Bonds Payable Interest Expense Debit 100,000 8,691 5,741 1,013 Required: With the information given, answer the following questions: Credit 102,491 3,535 9,419
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
N1.
Account
Transcribed Image Text:Plug Corporation purchased $100,000 par value bonds of its subsidiary, Spark Company, on December 31, 20X5, from Lemon
Corporation for $102,800. The 10-year bonds bear a 9 percent coupon rate, and Spark originally sold them on January 1, 20X3, to
Lemon at 95. Interest is paid annually on December 31. Plug owns 85 percent of the stock of Spark.
In preparing the consolidation worksheet at December 31, 20X6, Plug's controller made the following entry to eliminate the effects of
the intercorporate bond ownership:
Consolidation Worksheet Entries
Bonds Payable
Interest Income
Retained Earnings, January 1
Noncontrolling Interest
Investment in Spark Company Bonds
Discount on Bonds Payable
Interest Expense
Required:
With the information given, answer the following questions:
A
Debit
100,000
8,691
5,741
1,013
Show Transcribed Text
No
Required:
With the information given, answer the following questions:
Event
1
a. Prepare the journal entry made by Plug in 20X6 to record its interest income on the Spark bonds that it holds. (If n
required for a transaction/event, select "No journal entry required" in the first account field. Do not round your in
calculations. Round your final answers to nearest whole dollar.)
Credit
102,491
3,535
9,419
X Answer is not complete.
Cash
Investment in Spark Company bonds
Interest income
General Journal
Debit
Credit
8,691
Transcribed Image Text:b. Prepare the consolidation entry to remove the effects of the intercorporate bond ownership in completing a three-part consolidation
worksheet at December 31, 20X5. (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
Event
1
Answer is not complete.
Bonds payable
Loss on bond retirement
Investment in Spark Company bonds
Discount on bonds payable
Consolidated net income
Income to controlling interest
Accounts
20X5
Debit
100,000
c. Spark reported net income of $60,000 and $80,000 for 20X5 and 20X6, respectively. Plug reported income from its separate
operations of $120,000 and $150,000 for 20x5 and 20X6, respectively. What amount of consolidated net income and income to the
controlling interest will be reported in the consolidated income statements for 20x5 and 20X6? (Do not round your intermediate
calculations. Round your final answers to nearest whole dollar.)
20X6
Credit
102,906 x
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