Effective interest method of bond amortization: When bond is sold at premium, the amount of premium must be amortized to interest expense over the life of bond. The preferred method of amortization is the effective interest method. In this method, the amount of interest expense in a given year will correlate with the amount of the
Retirement of bonds: When a constrictive retirement occurs, the consolidated income statement for the period reports a gain or loss on retirement, but not reported in consolidated
The amount of interest expenses that should be reported in consolidated income statement for 20X3.
b
Effective interest method of bond amortization: When bond is sold at premium, the amount of premium must be amortized to interest expense over the life of bond. The preferred method of amortization is the effective interest method. In this method, the amount of interest expense in a given year will correlate with the amount of the bond’s book value.
Retirement of bonds: When a constrictive retirement occurs, the consolidated income statement for the period reports a gain or loss on retirement, but not reported in consolidated balance sheet. If the company purchases the bond of an affiliate from an unrelated party at a price equal to the liability reported, the elimination entries is required to be prepared in consolidated financial statement.
The amount of gain or loss on constructive bond retirement to be reported in 20X3.
c
Effective interest method of bond amortization: When bond is sold at premium, the amount of premium must be amortized to interest expense over the life of bond. The preferred method of amortization is the effective interest method. In this method, the amount of interest expense in a given year will correlate with the amount of the bond’s book value.
Retirement of bonds: When a constrictive retirement occurs, the consolidated income statement for the period reports a gain or loss on retirement, but not reported in consolidated balance sheet. If the company purchases the bond of an affiliate from an unrelated party at a price equal to the liability reported, the elimination entries is required to be prepared in consolidated financial statement.
Preparation of elimination entries for consolidation work sheet for December 31, 20X3.
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Chapter 8 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
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