Several years ago Brant, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2013, Zack Corporation (a wholly owned subsidiary of Brant) purchased $150,000 of these bonds on the open market for $171,000, a price based on an effective interest rate of 7 percent. The bond liability had a book value on that date of $780,000. 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, 2013 and December 31, 2015? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Several years ago Brant, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2013, Zack Corporation (a wholly owned subsidiary of Brant) purchased $150,000 of these bonds on the open market for $171,000, a price based on an effective interest rate of 7 percent. The bond liability had a book value on that date of $780,000. 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, 2013 and December 31, 2015? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Several years ago Brant, Inc., sold $900,000 in bonds to the public. Annual cash
interest of 9 percent ($81,000) was to be paid on this debt. The bonds were issued
at a discount to yield 12 percent. At the beginning of 2013, Zack Corporation (a
wholly owned subsidiary of Brant) purchased $150,000 of these bonds on the
open market for $171,000, a price based on an effective interest rate of 7 percent.
The bond liability had a book value on that date of $780,000. 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, 2013 and December 31, 2015? (If no entry is required for a
transaction/event, select "No journal entry required" in the first account
field.)
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