Several years ago Brant, Inc., sold $850,000 in bonds to the public. Annual cash interest of 9 percent ($76,500) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2016, Zack Corporation (a wholly owned subsidiary of Brant) purchased $170,000 of these bonds on the open market for $191,000, a price based on an effective interest rate of 7 percent. The bond liability had a carrying amount on that date of $710,000. 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, 2016 and December 31, 2018?
Several years ago Brant, Inc., sold $850,000 in bonds to the public. Annual cash interest of 9 percent ($76,500) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2016, Zack Corporation (a wholly owned subsidiary of Brant) purchased $170,000 of these bonds on the open market for $191,000, a price based on an effective interest rate of 7 percent. The bond liability had a carrying amount on that date of $710,000. Assume Brant uses the equity method to account internally for its investment in Zack.
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a. & b. What consolidation entry would be required for these bonds on December 31, 2016 and December 31, 2018? (If no entry is required for a transaction/event, select "No
journal entry required" in the first account field. Round your intermediate answers to nearest whole number.)
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