Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements. The journal entries for 20X3 in F’s books related to its investment in V’s stocks and bonds.

Question

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Answer 1

Question

Chapter 8, Problem 8.16P

a

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The journal entries for 20X3 in F’s books related to its investment in V’s stocks and bonds.

a

Expert Solution

Explanation of Solution

Date/20X3	Particulars	Debit $	Credit $
	To record receipt of interest on bond investment
Jan -1	Cash	2,000
	Interest receivable		2,000
	(Received cash on account of interest on bonds)

July 1	To record receipt of bond interest
	Cash	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received cash on account of interest)

Dec 31	To record dividends for V
	Cash	7,000
	Investment in V company stock		7,000
	(Received cash dividends)

	To record accrued interest income
	Interest receivable	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received accrued interest from investment in V company bonds)

	To record income
	Investment in V Company stock	21,000
	Income from subsidiary		21,000
	(Income from subsidiary is recognized)

	To record amortization differential
	Income from subsidiary	2,800
	Investment in V company stock		2,800
	(Amortization differential on income from subsidiary recognized)

Interest on bond semiannually ($50,000 ×0.08)×6/12 = $2,000 . Is received and Debited to cash account.
Amortization of bond premium ($50,000 – 45,000) =5,000
Semiannual recognition $5,000÷20 instalments = $250 .

Debited to investment in V company bonds.
Dividends from V company $10,000, parental share of 0.70 is transferred $10,000 × 0.70 = 7,000
To record equity method income $30,000 × 0.70 Debited to V company stock
Amortization differential is ($56,000÷14 years) ×0.70 = $2,800

b

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The entries in V’s books related to bond issue.

b

Expert Solution

Explanation of Solution

Date	Particulars	Debit $	Credit $
Jan 1	To record the interest payment
	Interest payable	4,000
	Cash		4,000
	(Paid cash on account of interest payable)

July 1	To record semiannual interest payment and bond Amortization
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Semiannual interest payment and amortization recognized)

Dec 31
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Paid cash for interest expenses and discount on bonds payable recognized)

Interest payment recognized ($100,000 × 0.08) ÷2 =$4,000
Bond discount payable $10,000 ÷20 instalments = $500 Credited and recognized as bond expense
Semiannual interest payment and bond discount recognized

c

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

Elimination entries for 20X3 needed for consolidation

c

Expert Solution

Explanation of Solution

	Debit $	Credit $
Eliminate income form subsidiary
Income from subsidiary	18,200
Dividends declared		7,000
Investment in V company stock		11,200
(Income from subsidiary eliminated)

Assign income to Non-controlling interest
Income to Non-controlling interest	7,800
Dividends declared		3,000
Non-controlling interest		4,800
( Income assigned to non-controlling interest)

Elimination of beginning investment
Common stock V company	50,000
Retained earnings January 1	100,000
Differential	48,000
Investment in V company stock		138,600
Non-controlling interest		59,400
(Beginning investment in V’s stock eliminated by reversal)

Assign differential to record amortization
Land buildings and Equipment	44,000
Operating expenses	4,000
Differential		48,000
(Differential on land building and equipment is recognized )

Elimination of inter-company bond holding
Bonds payable	50,000
Interest income	4,500
Investment in C company bonds		46,500
Interest expense		4,500
Discount on bonds payable		3,500
(Intercompany bond holdings eliminated)

Elimination of intercompany receivable/payable
Interest payable	2,000
Interest receivable		2,000
(Intercompany receivables and payables eliminated by setoff)

Elimination of profit on intercompany sale of land
Retained earnings January 1	5,600
Non-controlling interest	2,400
Land, buildings and equipment		8,000
(Unrealized profit on sale of land eliminated)

Income from subsidiary eliminated by reverse entry $18,200($21,000 – 2,800 amortization of differential)

Dividends $7,000(10,000 × .70) and investment $11,200

Assignment of income to non-controlling interest $7,800[$30,000 – ($56,000÷14 years)] ×.30

Dividends $3,000($10,000 ×.30) non-controlling interest $4,800

Elimination of beginning investment

Differential $48,000 ($56,000 – ($4,000 × 2 years)

Investment in V company stock $138,600 ($50,000 + $100,000 + $48,000)×.70 Non-controlling interest $59,400 ($50,000 + $100,000 + $48,000)×.30

Assign differential on land buildings and equipment $44,000 ($56,000 −$4,000 × 3 years)
Eliminate intercompany bond holding Investment $46,500 ( $45,000+(250 ×6 periods) discount on bond payable $3,500($7,000 ÷2)
Elimination of intercompany receivable and payable by setoff entry
Intercompany sale of land eliminated by reversing the transaction.

e

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The preparation of consolidation worksheet for 20X2

e

Expert Solution

Answer to Problem 8.16P

Consolidated retained earnings and total assets as per consolidated worksheet $276,000 and $853,800 respectively.

Explanation of Solution

F and V

Consolidation worksheet

December 31 20X3

			Eliminations
	F $	V $	Debit $	Credit $	Consolidation $
Sales	300,000	200,000			500,000
Interest income	4,500		4,500
Income from subsidiary	18,200		18,200
Less: operating expenses	(198,500)	(161,000)	4,000		(363,500)
Interest expenses	(27,000)	(9,000)		4,500	(31,500)
Consolidated net income					105,000
Income to NCI			7,800		(7,800)

Net income	97,200	30,000	34,500	4,500	97,200

Retained earnings January 1	244,400	100,000	100,000
			5,600		238,800
Net income	97,200	30,000	34,500	4,500	97,200
Dividends declared	(60,000)	(10,000)		7,000
				3,000	(60,000)
Retained earnings December 31	281,600	120,000	140,100	14,400	276,000

Cash and Receivables	30,300	46,000		2,000	74,300
Inventory	170,000	70,000			240,000
Land, buildings & equipment	320,000	180,000	44,000	8,000	536,000
Discount on bond payable		7,000		3,500	3,500
Investment in V company
Stock	149,800			11,200
				138,600
Bonds	46,500			46,500
Differential			48,000	48,000
Total Assets	716,600	303,000			853,800

Current liabilities	35,000	33,000	2,000		66,000
Bonds payable	300,000	100,000	50,000		350,000
Common stock	100,000	50,000	50,000		100,000
Retained earnings	281,600	120,000	140,100	14,500	276,000
Non-controlling interest			2,400	4,800
				59,400	61,800
Total Equity and Liability	716,600	303,000	244,500	78,700	853,800

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Students have asked these similar questions

3. On October 1, Dennis Company purchased P200,000 face value 12% bonds for 98 plus accrued interest and brokerage fees and classified them as held-to-maturity securities. Interest is paid semiannually on January 1 and July 1. Brokerage fees for this transaction were P700. At what amount should this acquisition of bonds be recorded? a. P196,000 b. P196,700 c. P202,000 d. P202,700

Gonzalez Company acquired $183,600 of Walker Co., 4% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $43,800 of the bonds for 97. Journalize entries to record the following in Year 1 (refer to the Chart of Accounts for exact wording of account titles): a. The initial acquisition of the bonds on May 1. b. The semiannual interest received on November 1. c. The sale of the bonds on November 1. d. The accrual of $932 interest on December 31.

Intercompany Bond Transactions:

Answer 2

Question

Chapter 8, Problem 8.16P

a

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The journal entries for 20X3 in F’s books related to its investment in V’s stocks and bonds.

a

Expert Solution

Explanation of Solution

Date/20X3	Particulars	Debit $	Credit $
	To record receipt of interest on bond investment
Jan -1	Cash	2,000
	Interest receivable		2,000
	(Received cash on account of interest on bonds)

July 1	To record receipt of bond interest
	Cash	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received cash on account of interest)

Dec 31	To record dividends for V
	Cash	7,000
	Investment in V company stock		7,000
	(Received cash dividends)

	To record accrued interest income
	Interest receivable	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received accrued interest from investment in V company bonds)

	To record income
	Investment in V Company stock	21,000
	Income from subsidiary		21,000
	(Income from subsidiary is recognized)

	To record amortization differential
	Income from subsidiary	2,800
	Investment in V company stock		2,800
	(Amortization differential on income from subsidiary recognized)

Interest on bond semiannually ($50,000 ×0.08)×6/12 = $2,000 . Is received and Debited to cash account.
Amortization of bond premium ($50,000 – 45,000) =5,000
Semiannual recognition $5,000÷20 instalments = $250 .

Debited to investment in V company bonds.
Dividends from V company $10,000, parental share of 0.70 is transferred $10,000 × 0.70 = 7,000
To record equity method income $30,000 × 0.70 Debited to V company stock
Amortization differential is ($56,000÷14 years) ×0.70 = $2,800

b

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The entries in V’s books related to bond issue.

b

Expert Solution

Explanation of Solution

Date	Particulars	Debit $	Credit $
Jan 1	To record the interest payment
	Interest payable	4,000
	Cash		4,000
	(Paid cash on account of interest payable)

July 1	To record semiannual interest payment and bond Amortization
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Semiannual interest payment and amortization recognized)

Dec 31
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Paid cash for interest expenses and discount on bonds payable recognized)

Interest payment recognized ($100,000 × 0.08) ÷2 =$4,000
Bond discount payable $10,000 ÷20 instalments = $500 Credited and recognized as bond expense
Semiannual interest payment and bond discount recognized

c

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

Elimination entries for 20X3 needed for consolidation

c

Expert Solution

Explanation of Solution

	Debit $	Credit $
Eliminate income form subsidiary
Income from subsidiary	18,200
Dividends declared		7,000
Investment in V company stock		11,200
(Income from subsidiary eliminated)

Assign income to Non-controlling interest
Income to Non-controlling interest	7,800
Dividends declared		3,000
Non-controlling interest		4,800
( Income assigned to non-controlling interest)

Elimination of beginning investment
Common stock V company	50,000
Retained earnings January 1	100,000
Differential	48,000
Investment in V company stock		138,600
Non-controlling interest		59,400
(Beginning investment in V’s stock eliminated by reversal)

Assign differential to record amortization
Land buildings and Equipment	44,000
Operating expenses	4,000
Differential		48,000
(Differential on land building and equipment is recognized )

Elimination of inter-company bond holding
Bonds payable	50,000
Interest income	4,500
Investment in C company bonds		46,500
Interest expense		4,500
Discount on bonds payable		3,500
(Intercompany bond holdings eliminated)

Elimination of intercompany receivable/payable
Interest payable	2,000
Interest receivable		2,000
(Intercompany receivables and payables eliminated by setoff)

Elimination of profit on intercompany sale of land
Retained earnings January 1	5,600
Non-controlling interest	2,400
Land, buildings and equipment		8,000
(Unrealized profit on sale of land eliminated)

Income from subsidiary eliminated by reverse entry $18,200($21,000 – 2,800 amortization of differential)

Dividends $7,000(10,000 × .70) and investment $11,200

Assignment of income to non-controlling interest $7,800[$30,000 – ($56,000÷14 years)] ×.30

Dividends $3,000($10,000 ×.30) non-controlling interest $4,800

Elimination of beginning investment

Differential $48,000 ($56,000 – ($4,000 × 2 years)

Investment in V company stock $138,600 ($50,000 + $100,000 + $48,000)×.70 Non-controlling interest $59,400 ($50,000 + $100,000 + $48,000)×.30

Assign differential on land buildings and equipment $44,000 ($56,000 −$4,000 × 3 years)
Eliminate intercompany bond holding Investment $46,500 ( $45,000+(250 ×6 periods) discount on bond payable $3,500($7,000 ÷2)
Elimination of intercompany receivable and payable by setoff entry
Intercompany sale of land eliminated by reversing the transaction.

e

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The preparation of consolidation worksheet for 20X2

e

Expert Solution

Answer to Problem 8.16P

Consolidated retained earnings and total assets as per consolidated worksheet $276,000 and $853,800 respectively.

Explanation of Solution

F and V

Consolidation worksheet

December 31 20X3

			Eliminations
	F $	V $	Debit $	Credit $	Consolidation $
Sales	300,000	200,000			500,000
Interest income	4,500		4,500
Income from subsidiary	18,200		18,200
Less: operating expenses	(198,500)	(161,000)	4,000		(363,500)
Interest expenses	(27,000)	(9,000)		4,500	(31,500)
Consolidated net income					105,000
Income to NCI			7,800		(7,800)

Net income	97,200	30,000	34,500	4,500	97,200

Retained earnings January 1	244,400	100,000	100,000
			5,600		238,800
Net income	97,200	30,000	34,500	4,500	97,200
Dividends declared	(60,000)	(10,000)		7,000
				3,000	(60,000)
Retained earnings December 31	281,600	120,000	140,100	14,400	276,000

Cash and Receivables	30,300	46,000		2,000	74,300
Inventory	170,000	70,000			240,000
Land, buildings & equipment	320,000	180,000	44,000	8,000	536,000
Discount on bond payable		7,000		3,500	3,500
Investment in V company
Stock	149,800			11,200
				138,600
Bonds	46,500			46,500
Differential			48,000	48,000
Total Assets	716,600	303,000			853,800

Current liabilities	35,000	33,000	2,000		66,000
Bonds payable	300,000	100,000	50,000		350,000
Common stock	100,000	50,000	50,000		100,000
Retained earnings	281,600	120,000	140,100	14,500	276,000
Non-controlling interest			2,400	4,800
				59,400	61,800
Total Equity and Liability	716,600	303,000	244,500	78,700	853,800

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Answer 3

Question

Chapter 8, Problem 8.16P

a

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The journal entries for 20X3 in F’s books related to its investment in V’s stocks and bonds.

a

Expert Solution

Explanation of Solution

Date/20X3	Particulars	Debit $	Credit $
	To record receipt of interest on bond investment
Jan -1	Cash	2,000
	Interest receivable		2,000
	(Received cash on account of interest on bonds)

July 1	To record receipt of bond interest
	Cash	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received cash on account of interest)

Dec 31	To record dividends for V
	Cash	7,000
	Investment in V company stock		7,000
	(Received cash dividends)

	To record accrued interest income
	Interest receivable	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received accrued interest from investment in V company bonds)

	To record income
	Investment in V Company stock	21,000
	Income from subsidiary		21,000
	(Income from subsidiary is recognized)

	To record amortization differential
	Income from subsidiary	2,800
	Investment in V company stock		2,800
	(Amortization differential on income from subsidiary recognized)

Interest on bond semiannually ($50,000 ×0.08)×6/12 = $2,000 . Is received and Debited to cash account.
Amortization of bond premium ($50,000 – 45,000) =5,000
Semiannual recognition $5,000÷20 instalments = $250 .

Debited to investment in V company bonds.
Dividends from V company $10,000, parental share of 0.70 is transferred $10,000 × 0.70 = 7,000
To record equity method income $30,000 × 0.70 Debited to V company stock
Amortization differential is ($56,000÷14 years) ×0.70 = $2,800

b

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The entries in V’s books related to bond issue.

b

Expert Solution

Explanation of Solution

Date	Particulars	Debit $	Credit $
Jan 1	To record the interest payment
	Interest payable	4,000
	Cash		4,000
	(Paid cash on account of interest payable)

July 1	To record semiannual interest payment and bond Amortization
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Semiannual interest payment and amortization recognized)

Dec 31
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Paid cash for interest expenses and discount on bonds payable recognized)

Interest payment recognized ($100,000 × 0.08) ÷2 =$4,000
Bond discount payable $10,000 ÷20 instalments = $500 Credited and recognized as bond expense
Semiannual interest payment and bond discount recognized

c

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

Elimination entries for 20X3 needed for consolidation

c

Expert Solution

Explanation of Solution

	Debit $	Credit $
Eliminate income form subsidiary
Income from subsidiary	18,200
Dividends declared		7,000
Investment in V company stock		11,200
(Income from subsidiary eliminated)

Assign income to Non-controlling interest
Income to Non-controlling interest	7,800
Dividends declared		3,000
Non-controlling interest		4,800
( Income assigned to non-controlling interest)

Elimination of beginning investment
Common stock V company	50,000
Retained earnings January 1	100,000
Differential	48,000
Investment in V company stock		138,600
Non-controlling interest		59,400
(Beginning investment in V’s stock eliminated by reversal)

Assign differential to record amortization
Land buildings and Equipment	44,000
Operating expenses	4,000
Differential		48,000
(Differential on land building and equipment is recognized )

Elimination of inter-company bond holding
Bonds payable	50,000
Interest income	4,500
Investment in C company bonds		46,500
Interest expense		4,500
Discount on bonds payable		3,500
(Intercompany bond holdings eliminated)

Elimination of intercompany receivable/payable
Interest payable	2,000
Interest receivable		2,000
(Intercompany receivables and payables eliminated by setoff)

Elimination of profit on intercompany sale of land
Retained earnings January 1	5,600
Non-controlling interest	2,400
Land, buildings and equipment		8,000
(Unrealized profit on sale of land eliminated)

Income from subsidiary eliminated by reverse entry $18,200($21,000 – 2,800 amortization of differential)

Dividends $7,000(10,000 × .70) and investment $11,200

Assignment of income to non-controlling interest $7,800[$30,000 – ($56,000÷14 years)] ×.30

Dividends $3,000($10,000 ×.30) non-controlling interest $4,800

Elimination of beginning investment

Differential $48,000 ($56,000 – ($4,000 × 2 years)

Investment in V company stock $138,600 ($50,000 + $100,000 + $48,000)×.70 Non-controlling interest $59,400 ($50,000 + $100,000 + $48,000)×.30

Assign differential on land buildings and equipment $44,000 ($56,000 −$4,000 × 3 years)
Eliminate intercompany bond holding Investment $46,500 ( $45,000+(250 ×6 periods) discount on bond payable $3,500($7,000 ÷2)
Elimination of intercompany receivable and payable by setoff entry
Intercompany sale of land eliminated by reversing the transaction.

e

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The preparation of consolidation worksheet for 20X2

e

Expert Solution

Answer to Problem 8.16P

Consolidated retained earnings and total assets as per consolidated worksheet $276,000 and $853,800 respectively.

Explanation of Solution

F and V

Consolidation worksheet

December 31 20X3

			Eliminations
	F $	V $	Debit $	Credit $	Consolidation $
Sales	300,000	200,000			500,000
Interest income	4,500		4,500
Income from subsidiary	18,200		18,200
Less: operating expenses	(198,500)	(161,000)	4,000		(363,500)
Interest expenses	(27,000)	(9,000)		4,500	(31,500)
Consolidated net income					105,000
Income to NCI			7,800		(7,800)

Net income	97,200	30,000	34,500	4,500	97,200

Retained earnings January 1	244,400	100,000	100,000
			5,600		238,800
Net income	97,200	30,000	34,500	4,500	97,200
Dividends declared	(60,000)	(10,000)		7,000
				3,000	(60,000)
Retained earnings December 31	281,600	120,000	140,100	14,400	276,000

Cash and Receivables	30,300	46,000		2,000	74,300
Inventory	170,000	70,000			240,000
Land, buildings & equipment	320,000	180,000	44,000	8,000	536,000
Discount on bond payable		7,000		3,500	3,500
Investment in V company
Stock	149,800			11,200
				138,600
Bonds	46,500			46,500
Differential			48,000	48,000
Total Assets	716,600	303,000			853,800

Current liabilities	35,000	33,000	2,000		66,000
Bonds payable	300,000	100,000	50,000		350,000
Common stock	100,000	50,000	50,000		100,000
Retained earnings	281,600	120,000	140,100	14,500	276,000
Non-controlling interest			2,400	4,800
				59,400	61,800
Total Equity and Liability	716,600	303,000	244,500	78,700	853,800

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Answer 4

Question

Chapter 8, Problem 8.16P

a

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The journal entries for 20X3 in F’s books related to its investment in V’s stocks and bonds.

a

Expert Solution

Explanation of Solution

Date/20X3	Particulars	Debit $	Credit $
	To record receipt of interest on bond investment
Jan -1	Cash	2,000
	Interest receivable		2,000
	(Received cash on account of interest on bonds)

July 1	To record receipt of bond interest
	Cash	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received cash on account of interest)

Dec 31	To record dividends for V
	Cash	7,000
	Investment in V company stock		7,000
	(Received cash dividends)

	To record accrued interest income
	Interest receivable	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received accrued interest from investment in V company bonds)

	To record income
	Investment in V Company stock	21,000
	Income from subsidiary		21,000
	(Income from subsidiary is recognized)

	To record amortization differential
	Income from subsidiary	2,800
	Investment in V company stock		2,800
	(Amortization differential on income from subsidiary recognized)

Interest on bond semiannually ($50,000 ×0.08)×6/12 = $2,000 . Is received and Debited to cash account.
Amortization of bond premium ($50,000 – 45,000) =5,000
Semiannual recognition $5,000÷20 instalments = $250 .

Debited to investment in V company bonds.
Dividends from V company $10,000, parental share of 0.70 is transferred $10,000 × 0.70 = 7,000
To record equity method income $30,000 × 0.70 Debited to V company stock
Amortization differential is ($56,000÷14 years) ×0.70 = $2,800

b

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The entries in V’s books related to bond issue.

b

Expert Solution

Explanation of Solution

Date	Particulars	Debit $	Credit $
Jan 1	To record the interest payment
	Interest payable	4,000
	Cash		4,000
	(Paid cash on account of interest payable)

July 1	To record semiannual interest payment and bond Amortization
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Semiannual interest payment and amortization recognized)

Dec 31
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Paid cash for interest expenses and discount on bonds payable recognized)

Interest payment recognized ($100,000 × 0.08) ÷2 =$4,000
Bond discount payable $10,000 ÷20 instalments = $500 Credited and recognized as bond expense
Semiannual interest payment and bond discount recognized

c

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

Elimination entries for 20X3 needed for consolidation

c

Expert Solution

Explanation of Solution

	Debit $	Credit $
Eliminate income form subsidiary
Income from subsidiary	18,200
Dividends declared		7,000
Investment in V company stock		11,200
(Income from subsidiary eliminated)

Assign income to Non-controlling interest
Income to Non-controlling interest	7,800
Dividends declared		3,000
Non-controlling interest		4,800
( Income assigned to non-controlling interest)

Elimination of beginning investment
Common stock V company	50,000
Retained earnings January 1	100,000
Differential	48,000
Investment in V company stock		138,600
Non-controlling interest		59,400
(Beginning investment in V’s stock eliminated by reversal)

Assign differential to record amortization
Land buildings and Equipment	44,000
Operating expenses	4,000
Differential		48,000
(Differential on land building and equipment is recognized )

Elimination of inter-company bond holding
Bonds payable	50,000
Interest income	4,500
Investment in C company bonds		46,500
Interest expense		4,500
Discount on bonds payable		3,500
(Intercompany bond holdings eliminated)

Elimination of intercompany receivable/payable
Interest payable	2,000
Interest receivable		2,000
(Intercompany receivables and payables eliminated by setoff)

Elimination of profit on intercompany sale of land
Retained earnings January 1	5,600
Non-controlling interest	2,400
Land, buildings and equipment		8,000
(Unrealized profit on sale of land eliminated)

Income from subsidiary eliminated by reverse entry $18,200($21,000 – 2,800 amortization of differential)

Dividends $7,000(10,000 × .70) and investment $11,200

Assignment of income to non-controlling interest $7,800[$30,000 – ($56,000÷14 years)] ×.30

Dividends $3,000($10,000 ×.30) non-controlling interest $4,800

Elimination of beginning investment

Differential $48,000 ($56,000 – ($4,000 × 2 years)

Investment in V company stock $138,600 ($50,000 + $100,000 + $48,000)×.70 Non-controlling interest $59,400 ($50,000 + $100,000 + $48,000)×.30

Assign differential on land buildings and equipment $44,000 ($56,000 −$4,000 × 3 years)
Eliminate intercompany bond holding Investment $46,500 ( $45,000+(250 ×6 periods) discount on bond payable $3,500($7,000 ÷2)
Elimination of intercompany receivable and payable by setoff entry
Intercompany sale of land eliminated by reversing the transaction.

e

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The preparation of consolidation worksheet for 20X2

e

Expert Solution

Answer to Problem 8.16P

Consolidated retained earnings and total assets as per consolidated worksheet $276,000 and $853,800 respectively.

Explanation of Solution

F and V

Consolidation worksheet

December 31 20X3

			Eliminations
	F $	V $	Debit $	Credit $	Consolidation $
Sales	300,000	200,000			500,000
Interest income	4,500		4,500
Income from subsidiary	18,200		18,200
Less: operating expenses	(198,500)	(161,000)	4,000		(363,500)
Interest expenses	(27,000)	(9,000)		4,500	(31,500)
Consolidated net income					105,000
Income to NCI			7,800		(7,800)

Net income	97,200	30,000	34,500	4,500	97,200

Retained earnings January 1	244,400	100,000	100,000
			5,600		238,800
Net income	97,200	30,000	34,500	4,500	97,200
Dividends declared	(60,000)	(10,000)		7,000
				3,000	(60,000)
Retained earnings December 31	281,600	120,000	140,100	14,400	276,000

Cash and Receivables	30,300	46,000		2,000	74,300
Inventory	170,000	70,000			240,000
Land, buildings & equipment	320,000	180,000	44,000	8,000	536,000
Discount on bond payable		7,000		3,500	3,500
Investment in V company
Stock	149,800			11,200
				138,600
Bonds	46,500			46,500
Differential			48,000	48,000
Total Assets	716,600	303,000			853,800

Current liabilities	35,000	33,000	2,000		66,000
Bonds payable	300,000	100,000	50,000		350,000
Common stock	100,000	50,000	50,000		100,000
Retained earnings	281,600	120,000	140,100	14,500	276,000
Non-controlling interest			2,400	4,800
				59,400	61,800
Total Equity and Liability	716,600	303,000	244,500	78,700	853,800

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Answer 5

Chapter 8, Problem 8.16P

a

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The journal entries for 20X3 in F’s books related to its investment in V’s stocks and bonds.

a

Expert Solution

Explanation of Solution

Date/20X3	Particulars	Debit $	Credit $
	To record receipt of interest on bond investment
Jan -1	Cash	2,000
	Interest receivable		2,000
	(Received cash on account of interest on bonds)

July 1	To record receipt of bond interest
	Cash	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received cash on account of interest)

Dec 31	To record dividends for V
	Cash	7,000
	Investment in V company stock		7,000
	(Received cash dividends)

	To record accrued interest income
	Interest receivable	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received accrued interest from investment in V company bonds)

	To record income
	Investment in V Company stock	21,000
	Income from subsidiary		21,000
	(Income from subsidiary is recognized)

	To record amortization differential
	Income from subsidiary	2,800
	Investment in V company stock		2,800
	(Amortization differential on income from subsidiary recognized)

Interest on bond semiannually ($50,000 ×0.08)×6/12 = $2,000 . Is received and Debited to cash account.
Amortization of bond premium ($50,000 – 45,000) =5,000
Semiannual recognition $5,000÷20 instalments = $250 .

Debited to investment in V company bonds.
Dividends from V company $10,000, parental share of 0.70 is transferred $10,000 × 0.70 = 7,000
To record equity method income $30,000 × 0.70 Debited to V company stock
Amortization differential is ($56,000÷14 years) ×0.70 = $2,800

b

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The entries in V’s books related to bond issue.

b

Expert Solution

Explanation of Solution

Date	Particulars	Debit $	Credit $
Jan 1	To record the interest payment
	Interest payable	4,000
	Cash		4,000
	(Paid cash on account of interest payable)

July 1	To record semiannual interest payment and bond Amortization
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Semiannual interest payment and amortization recognized)

Dec 31
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Paid cash for interest expenses and discount on bonds payable recognized)

Interest payment recognized ($100,000 × 0.08) ÷2 =$4,000
Bond discount payable $10,000 ÷20 instalments = $500 Credited and recognized as bond expense
Semiannual interest payment and bond discount recognized

c

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

Elimination entries for 20X3 needed for consolidation

c

Expert Solution

Explanation of Solution

	Debit $	Credit $
Eliminate income form subsidiary
Income from subsidiary	18,200
Dividends declared		7,000
Investment in V company stock		11,200
(Income from subsidiary eliminated)

Assign income to Non-controlling interest
Income to Non-controlling interest	7,800
Dividends declared		3,000
Non-controlling interest		4,800
( Income assigned to non-controlling interest)

Elimination of beginning investment
Common stock V company	50,000
Retained earnings January 1	100,000
Differential	48,000
Investment in V company stock		138,600
Non-controlling interest		59,400
(Beginning investment in V’s stock eliminated by reversal)

Assign differential to record amortization
Land buildings and Equipment	44,000
Operating expenses	4,000
Differential		48,000
(Differential on land building and equipment is recognized )

Elimination of inter-company bond holding
Bonds payable	50,000
Interest income	4,500
Investment in C company bonds		46,500
Interest expense		4,500
Discount on bonds payable		3,500
(Intercompany bond holdings eliminated)

Elimination of intercompany receivable/payable
Interest payable	2,000
Interest receivable		2,000
(Intercompany receivables and payables eliminated by setoff)

Elimination of profit on intercompany sale of land
Retained earnings January 1	5,600
Non-controlling interest	2,400
Land, buildings and equipment		8,000
(Unrealized profit on sale of land eliminated)

Income from subsidiary eliminated by reverse entry $18,200($21,000 – 2,800 amortization of differential)

Dividends $7,000(10,000 × .70) and investment $11,200

Assignment of income to non-controlling interest $7,800[$30,000 – ($56,000÷14 years)] ×.30

Dividends $3,000($10,000 ×.30) non-controlling interest $4,800

Elimination of beginning investment

Differential $48,000 ($56,000 – ($4,000 × 2 years)

Investment in V company stock $138,600 ($50,000 + $100,000 + $48,000)×.70 Non-controlling interest $59,400 ($50,000 + $100,000 + $48,000)×.30

Assign differential on land buildings and equipment $44,000 ($56,000 −$4,000 × 3 years)
Eliminate intercompany bond holding Investment $46,500 ( $45,000+(250 ×6 periods) discount on bond payable $3,500($7,000 ÷2)
Elimination of intercompany receivable and payable by setoff entry
Intercompany sale of land eliminated by reversing the transaction.

e

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The preparation of consolidation worksheet for 20X2

e

Expert Solution

Answer to Problem 8.16P

Consolidated retained earnings and total assets as per consolidated worksheet $276,000 and $853,800 respectively.

Explanation of Solution

F and V

Consolidation worksheet

December 31 20X3

			Eliminations
	F $	V $	Debit $	Credit $	Consolidation $
Sales	300,000	200,000			500,000
Interest income	4,500		4,500
Income from subsidiary	18,200		18,200
Less: operating expenses	(198,500)	(161,000)	4,000		(363,500)
Interest expenses	(27,000)	(9,000)		4,500	(31,500)
Consolidated net income					105,000
Income to NCI			7,800		(7,800)

Net income	97,200	30,000	34,500	4,500	97,200

Retained earnings January 1	244,400	100,000	100,000
			5,600		238,800
Net income	97,200	30,000	34,500	4,500	97,200
Dividends declared	(60,000)	(10,000)		7,000
				3,000	(60,000)
Retained earnings December 31	281,600	120,000	140,100	14,400	276,000

Cash and Receivables	30,300	46,000		2,000	74,300
Inventory	170,000	70,000			240,000
Land, buildings & equipment	320,000	180,000	44,000	8,000	536,000
Discount on bond payable		7,000		3,500	3,500
Investment in V company
Stock	149,800			11,200
				138,600
Bonds	46,500			46,500
Differential			48,000	48,000
Total Assets	716,600	303,000			853,800

Current liabilities	35,000	33,000	2,000		66,000
Bonds payable	300,000	100,000	50,000		350,000
Common stock	100,000	50,000	50,000		100,000
Retained earnings	281,600	120,000	140,100	14,500	276,000
Non-controlling interest			2,400	4,800
				59,400	61,800
Total Equity and Liability	716,600	303,000	244,500	78,700	853,800

Answer 6

Chapter 8, Problem 8.16P

a

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The journal entries for 20X3 in F’s books related to its investment in V’s stocks and bonds.

a

Expert Solution

Explanation of Solution

Date/20X3	Particulars	Debit $	Credit $
	To record receipt of interest on bond investment
Jan -1	Cash	2,000
	Interest receivable		2,000
	(Received cash on account of interest on bonds)

July 1	To record receipt of bond interest
	Cash	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received cash on account of interest)

Dec 31	To record dividends for V
	Cash	7,000
	Investment in V company stock		7,000
	(Received cash dividends)

	To record accrued interest income
	Interest receivable	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received accrued interest from investment in V company bonds)

	To record income
	Investment in V Company stock	21,000
	Income from subsidiary		21,000
	(Income from subsidiary is recognized)

	To record amortization differential
	Income from subsidiary	2,800
	Investment in V company stock		2,800
	(Amortization differential on income from subsidiary recognized)

Interest on bond semiannually ($50,000 ×0.08)×6/12 = $2,000 . Is received and Debited to cash account.
Amortization of bond premium ($50,000 – 45,000) =5,000
Semiannual recognition $5,000÷20 instalments = $250 .

Debited to investment in V company bonds.
Dividends from V company $10,000, parental share of 0.70 is transferred $10,000 × 0.70 = 7,000
To record equity method income $30,000 × 0.70 Debited to V company stock
Amortization differential is ($56,000÷14 years) ×0.70 = $2,800

Answer 7

Chapter 8, Problem 8.16P

a

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The journal entries for 20X3 in F’s books related to its investment in V’s stocks and bonds.

Answer 8

a

Expert Solution

Explanation of Solution

Date/20X3	Particulars	Debit $	Credit $
	To record receipt of interest on bond investment
Jan -1	Cash	2,000
	Interest receivable		2,000
	(Received cash on account of interest on bonds)

July 1	To record receipt of bond interest
	Cash	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received cash on account of interest)

Dec 31	To record dividends for V
	Cash	7,000
	Investment in V company stock		7,000
	(Received cash dividends)

	To record accrued interest income
	Interest receivable	2,000
	Investment in V company bonds	250
	Interest income		2,250
	(Received accrued interest from investment in V company bonds)

	To record income
	Investment in V Company stock	21,000
	Income from subsidiary		21,000
	(Income from subsidiary is recognized)

	To record amortization differential
	Income from subsidiary	2,800
	Investment in V company stock		2,800
	(Amortization differential on income from subsidiary recognized)

Interest on bond semiannually ($50,000 ×0.08)×6/12 = $2,000 . Is received and Debited to cash account.
Amortization of bond premium ($50,000 – 45,000) =5,000
Semiannual recognition $5,000÷20 instalments = $250 .

Debited to investment in V company bonds.
Dividends from V company $10,000, parental share of 0.70 is transferred $10,000 × 0.70 = 7,000
To record equity method income $30,000 × 0.70 Debited to V company stock
Amortization differential is ($56,000÷14 years) ×0.70 = $2,800

Answer 9

a

Expert Solution

Answer 10

a

Expert Solution

Answer 11

Expert Solution

Answer 12

b

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The entries in V’s books related to bond issue.

b

Expert Solution

Explanation of Solution

Date	Particulars	Debit $	Credit $
Jan 1	To record the interest payment
	Interest payable	4,000
	Cash		4,000
	(Paid cash on account of interest payable)

July 1	To record semiannual interest payment and bond Amortization
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Semiannual interest payment and amortization recognized)

Dec 31
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Paid cash for interest expenses and discount on bonds payable recognized)

Interest payment recognized ($100,000 × 0.08) ÷2 =$4,000
Bond discount payable $10,000 ÷20 instalments = $500 Credited and recognized as bond expense
Semiannual interest payment and bond discount recognized

Answer 13

b

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The entries in V’s books related to bond issue.

Answer 14

b

Expert Solution

Explanation of Solution

Date	Particulars	Debit $	Credit $
Jan 1	To record the interest payment
	Interest payable	4,000
	Cash		4,000
	(Paid cash on account of interest payable)

July 1	To record semiannual interest payment and bond Amortization
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Semiannual interest payment and amortization recognized)

Dec 31
	Interest expenses	4,500
	Discount on bonds payable		500
	Cash		4,000
	(Paid cash for interest expenses and discount on bonds payable recognized)

Interest payment recognized ($100,000 × 0.08) ÷2 =$4,000
Bond discount payable $10,000 ÷20 instalments = $500 Credited and recognized as bond expense
Semiannual interest payment and bond discount recognized

Answer 15

b

Expert Solution

Answer 16

b

Expert Solution

Answer 17

Expert Solution

Answer 18

c

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

Elimination entries for 20X3 needed for consolidation

c

Expert Solution

Explanation of Solution

	Debit $	Credit $
Eliminate income form subsidiary
Income from subsidiary	18,200
Dividends declared		7,000
Investment in V company stock		11,200
(Income from subsidiary eliminated)

Assign income to Non-controlling interest
Income to Non-controlling interest	7,800
Dividends declared		3,000
Non-controlling interest		4,800
( Income assigned to non-controlling interest)

Elimination of beginning investment
Common stock V company	50,000
Retained earnings January 1	100,000
Differential	48,000
Investment in V company stock		138,600
Non-controlling interest		59,400
(Beginning investment in V’s stock eliminated by reversal)

Assign differential to record amortization
Land buildings and Equipment	44,000
Operating expenses	4,000
Differential		48,000
(Differential on land building and equipment is recognized )

Elimination of inter-company bond holding
Bonds payable	50,000
Interest income	4,500
Investment in C company bonds		46,500
Interest expense		4,500
Discount on bonds payable		3,500
(Intercompany bond holdings eliminated)

Elimination of intercompany receivable/payable
Interest payable	2,000
Interest receivable		2,000
(Intercompany receivables and payables eliminated by setoff)

Elimination of profit on intercompany sale of land
Retained earnings January 1	5,600
Non-controlling interest	2,400
Land, buildings and equipment		8,000
(Unrealized profit on sale of land eliminated)

Income from subsidiary eliminated by reverse entry $18,200($21,000 – 2,800 amortization of differential)

Dividends $7,000(10,000 × .70) and investment $11,200

Assignment of income to non-controlling interest $7,800[$30,000 – ($56,000÷14 years)] ×.30

Dividends $3,000($10,000 ×.30) non-controlling interest $4,800

Elimination of beginning investment

Differential $48,000 ($56,000 – ($4,000 × 2 years)

Investment in V company stock $138,600 ($50,000 + $100,000 + $48,000)×.70 Non-controlling interest $59,400 ($50,000 + $100,000 + $48,000)×.30

Assign differential on land buildings and equipment $44,000 ($56,000 −$4,000 × 3 years)
Eliminate intercompany bond holding Investment $46,500 ( $45,000+(250 ×6 periods) discount on bond payable $3,500($7,000 ÷2)
Elimination of intercompany receivable and payable by setoff entry
Intercompany sale of land eliminated by reversing the transaction.

Answer 19

c

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

Elimination entries for 20X3 needed for consolidation

Answer 20

c

Expert Solution

Explanation of Solution

	Debit $	Credit $
Eliminate income form subsidiary
Income from subsidiary	18,200
Dividends declared		7,000
Investment in V company stock		11,200
(Income from subsidiary eliminated)

Assign income to Non-controlling interest
Income to Non-controlling interest	7,800
Dividends declared		3,000
Non-controlling interest		4,800
( Income assigned to non-controlling interest)

Elimination of beginning investment
Common stock V company	50,000
Retained earnings January 1	100,000
Differential	48,000
Investment in V company stock		138,600
Non-controlling interest		59,400
(Beginning investment in V’s stock eliminated by reversal)

Assign differential to record amortization
Land buildings and Equipment	44,000
Operating expenses	4,000
Differential		48,000
(Differential on land building and equipment is recognized )

Elimination of inter-company bond holding
Bonds payable	50,000
Interest income	4,500
Investment in C company bonds		46,500
Interest expense		4,500
Discount on bonds payable		3,500
(Intercompany bond holdings eliminated)

Elimination of intercompany receivable/payable
Interest payable	2,000
Interest receivable		2,000
(Intercompany receivables and payables eliminated by setoff)

Elimination of profit on intercompany sale of land
Retained earnings January 1	5,600
Non-controlling interest	2,400
Land, buildings and equipment		8,000
(Unrealized profit on sale of land eliminated)

Income from subsidiary eliminated by reverse entry $18,200($21,000 – 2,800 amortization of differential)

Dividends $7,000(10,000 × .70) and investment $11,200

Assignment of income to non-controlling interest $7,800[$30,000 – ($56,000÷14 years)] ×.30

Dividends $3,000($10,000 ×.30) non-controlling interest $4,800

Elimination of beginning investment

Differential $48,000 ($56,000 – ($4,000 × 2 years)

Investment in V company stock $138,600 ($50,000 + $100,000 + $48,000)×.70 Non-controlling interest $59,400 ($50,000 + $100,000 + $48,000)×.30

Assign differential on land buildings and equipment $44,000 ($56,000 −$4,000 × 3 years)
Eliminate intercompany bond holding Investment $46,500 ( $45,000+(250 ×6 periods) discount on bond payable $3,500($7,000 ÷2)
Elimination of intercompany receivable and payable by setoff entry
Intercompany sale of land eliminated by reversing the transaction.

Answer 21

c

Expert Solution

Answer 22

c

Expert Solution

Answer 23

Expert Solution

Answer 24

e

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The preparation of consolidation worksheet for 20X2

e

Expert Solution

Answer to Problem 8.16P

Consolidated retained earnings and total assets as per consolidated worksheet $276,000 and $853,800 respectively.

Explanation of Solution

F and V

Consolidation worksheet

December 31 20X3

			Eliminations
	F $	V $	Debit $	Credit $	Consolidation $
Sales	300,000	200,000			500,000
Interest income	4,500		4,500
Income from subsidiary	18,200		18,200
Less: operating expenses	(198,500)	(161,000)	4,000		(363,500)
Interest expenses	(27,000)	(9,000)		4,500	(31,500)
Consolidated net income					105,000
Income to NCI			7,800		(7,800)

Net income	97,200	30,000	34,500	4,500	97,200

Retained earnings January 1	244,400	100,000	100,000
			5,600		238,800
Net income	97,200	30,000	34,500	4,500	97,200
Dividends declared	(60,000)	(10,000)		7,000
				3,000	(60,000)
Retained earnings December 31	281,600	120,000	140,100	14,400	276,000

Cash and Receivables	30,300	46,000		2,000	74,300
Inventory	170,000	70,000			240,000
Land, buildings & equipment	320,000	180,000	44,000	8,000	536,000
Discount on bond payable		7,000		3,500	3,500
Investment in V company
Stock	149,800			11,200
				138,600
Bonds	46,500			46,500
Differential			48,000	48,000
Total Assets	716,600	303,000			853,800

Current liabilities	35,000	33,000	2,000		66,000
Bonds payable	300,000	100,000	50,000		350,000
Common stock	100,000	50,000	50,000		100,000
Retained earnings	281,600	120,000	140,100	14,500	276,000
Non-controlling interest			2,400	4,800
				59,400	61,800
Total Equity and Liability	716,600	303,000	244,500	78,700	853,800

Answer 25

e

To determine

Concept introduction:

Intercompany sale of bonds: When the intercompany sale of bonds occurs, all receivables and payables and liabilities between consolidated companies must be eliminated, including the purchase or sale of affiliates bonds any unrecognized discount or premium. The elimination is carried out mainly before drafting of consolidation worksheet, which helps in combining the balances in individual books of affiliates and the preparation of consolidated financial statements.

The preparation of consolidation worksheet for 20X2

Answer 26

e

Expert Solution

Answer to Problem 8.16P

Consolidated retained earnings and total assets as per consolidated worksheet $276,000 and $853,800 respectively.

Answer 27

e

Expert Solution

Answer 28

e

Expert Solution

Answer 29

Expert Solution

Answer 30

Explanation of Solution

F and V

Consolidation worksheet

December 31 20X3

			Eliminations
	F $	V $	Debit $	Credit $	Consolidation $
Sales	300,000	200,000			500,000
Interest income	4,500		4,500
Income from subsidiary	18,200		18,200
Less: operating expenses	(198,500)	(161,000)	4,000		(363,500)
Interest expenses	(27,000)	(9,000)		4,500	(31,500)
Consolidated net income					105,000
Income to NCI			7,800		(7,800)

Net income	97,200	30,000	34,500	4,500	97,200

Retained earnings January 1	244,400	100,000	100,000
			5,600		238,800
Net income	97,200	30,000	34,500	4,500	97,200
Dividends declared	(60,000)	(10,000)		7,000
				3,000	(60,000)
Retained earnings December 31	281,600	120,000	140,100	14,400	276,000

Cash and Receivables	30,300	46,000		2,000	74,300
Inventory	170,000	70,000			240,000
Land, buildings & equipment	320,000	180,000	44,000	8,000	536,000
Discount on bond payable		7,000		3,500	3,500
Investment in V company
Stock	149,800			11,200
				138,600
Bonds	46,500			46,500
Differential			48,000	48,000
Total Assets	716,600	303,000			853,800

Current liabilities	35,000	33,000	2,000		66,000
Bonds payable	300,000	100,000	50,000		350,000
Common stock	100,000	50,000	50,000		100,000
Retained earnings	281,600	120,000	140,100	14,500	276,000
Non-controlling interest			2,400	4,800
				59,400	61,800
Total Equity and Liability	716,600	303,000	244,500	78,700	853,800

Answer 31

Ch. 8 - Prob. 8.1Q Ch. 8 - What is meant by a constructive bond retirement in...Ch. 8 - Prob. 8.3Q Ch. 8 - Prob. 8.4Q Ch. 8 - When a parent company sells land to a subsidiary...Ch. 8 - Prob. 8.7Q Ch. 8 - Prob. 8.8Q Ch. 8 - Prob. 8.9Q Ch. 8 - Prob. 8.10Q Ch. 8 - Prob. 8.11Q

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