
a.
Identify the consolidation entry which would be required for these bonds on December 31, 2013.
a.

Explanation of Solution
The consolidation entry which would be required for these bonds on December 31, 2013:
Entry B | ||||
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) |
12/31/2013 | Bond payable | 154,040 | ||
Loss on retirement of Debt | 49,000 | |||
Interest Income | 14,070 | |||
Investment in Bonds | 198,870 | |||
Interest expense | 18,240 | |||
(being the intra-entity bonds and the loss on retirement recognized) |
Table: (1)
Working note:
Computation of Loss on Repurchase of Bonds | |
Particulars | Amount |
Cost of acquisition | $ 201,000 |
Carrying amount of Bonds | $ 152,000 |
Loss on repurchase | $ 49,000 |
Computation of Investment in Bonds as on December 31, 2013 | |
Particulars | Amount |
Cost of acquisition | $ 201,000 |
Amortization of premium: | |
Cash interest | $ 16,200 |
Interest income | $ 14,070 |
Investment in Bonds as on December 31, 2013 | $ 198,870 |
Computation of Bonds payable as on December 31, 2013 | |
Carrying amount of Bonds | $ 152,000 |
Amortization of discount: | |
Cash interest | $ 16,200 |
Interest expense | $ 18,240 |
Bonds payable as on December 31, 2013 | $ 154,040 |
Table: (2)
Computation of interest expense:
Computation of interest income:
b.
Identify the consolidation entry which would be required for these bonds on December 31, 2015.
b.

Explanation of Solution
The consolidation entry which would be required for these bonds on December 31, 2015 is as follows:
Entry *B | ||||
Date | Accounts Title and Explanation | Post Ref. | Debit ($) | Credit ($) |
12/31/2015 | Bond payable | 158,884 | ||
Investment in Company Z | 40,266 | |||
Interest Income | 13,761 | |||
Investment in Bonds | 194,152 | |||
Interest expense | 18,759 | |||
(being the intra-entity bonds and the loss on retirement recognized) |
Table: (3)
Working note:
Computation of Interest Balances for 2014 followed by 2015:
Interest Balances for 2014 followed by 2015 | |
Interest income: $198,870 | $13,921 |
Interest expense: $154,040 | $18,485 |
Table: (4)
Computation of Investment in Bonds Balance as on December 31, 2014:
Investment in Bonds Balance, December 31, 2014 | |
Carrying amount, January 1, 2014 | $ 198,870 |
Amortization of premium: | |
Cash interest | $ 16,200 |
Effective interest income | $ 13,921 |
Investment in Bonds balance as on December 31, 2014 | $ 196,591 |
Table: (5)
Computation of Bonds payable balance as on December 31, 2014:
Bonds Payable Balance as on December 31, 2014 | |
Carrying amount, January 1, 2014 | $ 154,040 |
Amortization of discount: | |
Cash interest | $ 16,200 |
Effective interest expense | $ 18,485 |
Bonds payable balance as on December 31, 2014 | $ 156,325 |
Table: (6)
Computation of Investment in Bonds balance as on December 31, 2015:
Investment in Bonds Balance, December 31, 2015 | |
Carrying amount, January 1, 2015 | $ 196,591 |
Amortization of premium: | |
Cash interest | $ 16,200 |
Effective interest income | $ 13,761 |
Investment in Bonds balance as on December 31, 2015 | $ 194,152 |
Table: (7)
Computation of Bonds payable balance as on December 31, 2015:
Bonds Payable Balance, December 31, 2015 | |
Carrying amount, January 1, 2015 | $ 156,325 |
Amortization of discount: | |
Cash interest | $ 16,200 |
Effective interest expense | $ 18,759 |
Bonds payable balance as on December 31, 2015 | $ 158,884 |
Table: (8)
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Advanced Accounting - Standalone book
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