Purse Corporation owns 70 percent of Scarf Company's voting shares. On January 1, 20X3, Scarf sold bonds with a par value of $682,500 at 98. Purse purchased $455,000 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 $ 19,110 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 fleld. 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 Answer is complete but not entirely correct. General Journal Interest receivable Cash Investment in Scarf Company bonds Interest income December 31, 20X Interest receivable Investment in Scarf Company bonds Interest income Debit 18,200 18,200 910 18,200 910 X Credit 18,200 19,110 19,110
Purse Corporation owns 70 percent of Scarf Company's voting shares. On January 1, 20X3, Scarf sold bonds with a par value of $682,500 at 98. Purse purchased $455,000 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 $ 19,110 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 fleld. 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 Answer is complete but not entirely correct. General Journal Interest receivable Cash Investment in Scarf Company bonds Interest income December 31, 20X Interest receivable Investment in Scarf Company bonds Interest income Debit 18,200 18,200 910 18,200 910 X Credit 18,200 19,110 19,110
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 2TP: Below is select information from two, independent companies. Additional information includes: On...
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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
$682,500 at 98. Purse purchased $455,000 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 $ 19,110
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
1
2
3
Date
January 1, 20X4
July 1, 20X4
Cash
Answer is complete but not entirely correct.
General Journal
Interest receivable
Cash
Investment in Scarf Company bonds
Interest income
December 31, 20X Interest receivable
Investment in Scarf Company bonds
Interest income
Debit
18,200
18,200
910
18,200
910 x
Credit
18,200
19,110
19,110 X
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