Several years ago Brant, Inc., sold $780,000 in bonds to the public. Annual cash interest of 9 percent ($70,200) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2019, Zack Corporation (a wholly owned subsidiary of Brant) purchased $130,000 of these bonds on the open market for $151,000, a price based on an effective interest rate of 7 percent. The bond liability had a carrying amount on that date of $660,000. Assume Brant uses the equity method to account internally for its investment in Zack. a. & b. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021? Prepare Consolidation Entry B to account for these bonds on December 31, 2019. Prepare Consolidation Entry *B to account for these bonds on December 31, 2021.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Several years ago Brant, Inc., sold $780,000 in bonds to the public. Annual cash interest of 9 percent ($70,200) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2019, Zack Corporation (a wholly owned subsidiary of Brant) purchased $130,000 of these bonds on the open market for $151,000, a price based on an effective interest rate of 7 percent. The bond liability had a carrying amount on that date of $660,000. Assume Brant uses the equity method to account internally for its investment in Zack.

 

  1. a. & b. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021?

  2. Prepare Consolidation Entry B to account for these bonds on December 31, 2019.

  3. Prepare Consolidation Entry *B to account for these bonds on December 31, 2021.

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