Concept explainers
a
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated
Requirement 1
The entries in the books of P related to investment in S for the year 20X2.
b
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in consolidated financial statement.
Requirement 2
The entries in books of P related to bond payable for 20X2.
c
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in consolidated financial statement.
Requirement 3
The entries in books of T related to investment in P’s bonds for 20X2.
d
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in consolidated financial statement.
Requirement 4
The entries elimination entries to complete consolidation worksheet for 20X2.
e
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in consolidated financial statement.
Requirement 5
The preparation of consolidation worksheet for 20X2
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Chapter 8 Solutions
ADVANCED FINANCIAL ACCOUNTING-ACCESS
- The share premium recognized on a convertible bond O A. remains in equity only if the bonds are actually converted В. reclassified out of equity to profit or loss if the bonds are not converted O c. remains in equity whether the bonds are actually converted or not O D. recognized as gain or loss on conversion E. becomes part of the bonds payable accountarrow_forwardIf bonds with a face value of $124000 are converted into common stock when the carrying value of the bonds is $118000, the entry to record the conversion will include a debit to O Bonds Payable equal to the market price of the bonds on the date of conversion. O Bonds Payable for $124000. O Discount on Bonds Payable for $6000. O Bonds Payable for $118000. eTextbook and Media Save for Later Attempts: 0 of 2 used Submit Answer @ 3 4 5 6 7 W e у S g h j k V b n m alt ctrlarrow_forwardThe balance in Unamortized Discount on Bonds Payable should be Oa. reported separately in the Current Liabilities section of the balance sheef Ob. added to the face amount of the related bonds payable on the balance sheet. O C. reported in the Paid-In Capital section of the balance sheet. Od. reported on the balance sheet as a deduction from the face amount of the related bonds payable.arrow_forward
- Bonds Payable has a balance of $951,000 and Discount on Bonds Payable has a balance of $11,412. If the issuing corporation redeems the bonds at 98, what is the amount of gain or loss on redemption? a.$7,608 loss b.$7,608 gain c.$11,412 gain d.$11,412 lossarrow_forwardDebt investment transactions, available-for-sale valuationSoto Industries Inc. in an athletic foot ware company that beganoperations on January 1, Year 1. The following transactions relate to debtinvestments acquired by Solo Industries Inc., which has a fiscal yearending on December 31: Instructions1. Journalize the entries to record these transactions.2. If the bond portfolio is classified as available for sale, what impactwould this have on financial statement disclosure?arrow_forward23.ABC Company acquired bonds for their par value between the date of interest collection. Accrued interest Select one: a. decrease the payment made to the seller. b. They represent an interest income that will be recorded on the date of interest collection. c. they are part of the payment made to the seller. d. they represent an expense in the acquisition of those bonds.arrow_forward
- 4. Boss Co. purchased bonds at a discount in the open market as an investment. The bonds will be held in order to collect their contractual cash flows. Boss should account for these bonds at a. Cost. c. Fair value through OCI. d. Lower of cost or market. b. Amortized cost. 5. According to PFRS 9, on initial recognition, the entity has the option of designating financial assets to be measured at FVPLarrow_forwardWhich of the following would NOT be included in the journal entry to show the conversion of bonds payable? O A credit to additional paid in capital O A debit to bonds payable O A debit to bond premium O A credit to gain on conversionarrow_forwardin the current year largo company purchased bonds on macdermont corporation with a cost of 125000 and a year end fair value of 127000 these are classified as long term available for sale debt securities prepare the journal entry to record any necessary fair value adjustment to the debt investments of december 31arrow_forward
- Bonds Payable has a balance of $867,000 and Premium on Bonds Payable has a balance of $9,537. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption? Oa. $16,473 loss Ob. $9,537 gain Oc. $893,010 gain Od. $9,537 lossarrow_forwardWhen the conversion of bonds payable to common stock is recorded under the market value method and the market value of the common stock exceeds the book value of the bonds at date of conversion, the difference is recorded as a debit to Loss on Conversion. debit to Additional Paid-in Capital−Common Stock. debit to Discount on Bonds Payable. debit to Retained Earnings.arrow_forwardJournalize the entries to record the following: If an amount box does not require an entry, leave it blank. a. The initial acquisition of the bonds on May 1. May 1 b. The semiannual interest received on November 1. Nov. 1 c. The sale of the bonds on November 1. Nov. 1 d. The accrual of $1,360 interest on December 31. Dec. 31arrow_forward
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