Horngren's Accounting (11th Edition)
Horngren's Accounting (11th Edition)
11th Edition
ISBN: 9780133856781
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 15, Problem E15.8E
To determine

Concept introduction:

Bond refers to a financial security which is issued by a business entity for raising funds for long-term. Bond generates return for the investors on a specified date and this return can be variable or fixed.

Requirement 1

To prepare:

Journal entries for the transactions of 2016.

Main Solution:

Date Accounts Title Debit Credit
Jan. 1, 2016 Long-term Investment –Held-to-Maturity $150000  
  Cash   $150000
  (For recording purchase of bond)    
       
June.30, 2016 Cash $2250  
  Interest Revenue   $2250
  (For recording interest on bond)    
       
Dec.31, 2016 Cash $2250  
  Interest Revenue   $2250
  (For recording interest on bond)    

To determine

Requirement 2;

To prepare: Journal entry for disposition of bond on maurity.

Main solution:

Date Accounts Title Debit Credit
Dec. 31, 2030 Cash $150000  
  Long-term Investment –Held-to-Maturity   $150000
  (For recording sale of bond)    

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Consolidation after Several Years  On January 1, 2016, Adams Corporation acquired all of the stock of Baker Company. The fair value of Adams’ shares used in the exchange was $37,500,000. At the time of acquisition, the book value of Baker’s shareholders’ equity was $5,000,000, and the book value of Baker’s building (25-year life) exceeded its fair value by $1,000,000. From the date of acquisition to December 31, 2021, Baker had cumulative net income of $1,300,000. For 2022, Baker reported net income of $300,000. Adams uses the complete equity method to account for its investment in Baker. There is no goodwill impairment loss for the period 2016 through 2021, but there is impairment loss of $100,000 in 2022. Baker declared no dividends during the period 2016–2022.  Required  Prepare the working paper eliminating entries necessary to consolidate the financial statements of Adams and Baker at December 31, 2022. Enter numerical answers using all zeros (do not abbreviate in thousands or in…
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