Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable. The purchase price of the SP bonds paid by P

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Answer 1

Question

Chapter 8, Problem 8.21AP

a

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The purchase price of the SP bonds paid by P

b

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The amount of gain or loss on bond retirement reported in consolidated income statement for 20X4.

c

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The necessary consolidated entries as of December 31, 20X4.

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On May 1, 20X1, Starlight Company purchased $750,000 of Gazing Corp's 12% bonds at 100 plus accrued interest. On December 31, 20X1, Starlight Co. received its annual interest. On March 31, 20X3, Starlight decided to sell half the bonds to Twinkly Inc. at 99 plus accrued interest. Prepare the journal entries for the following transactions: a. The purchase of the bonds b. The receipt of all interest c. The sale of the bonds to Twinkly Inc.

Facts from A11-7: On 1 July 20X2, New Company purchased $600,000 of Old Corp. 5.5% bonds, classified as an AC investment. The bonds pay semi-annual interest each 30 June and 31 December. The market interest rate was 5% on the date of purchase. The bonds mature on 30 June 20X5. Return to the facts of A11-7. Assume now that New Company is a private company that complies with ASPE. Straight-line amortization will be used rather than the effective-interest method. Required: Calculate the price paid by New Company. Construct a table that shows interest revenue reported by New Company, and the carrying value of the investment, for each interest period to maturity. Use the straight-line method. Give entries for the first three interest periods based on your calculations in requirement 2.

On January 1, 2024, X Corporation purchased bonds of R Corporation for $52 million 6 %, 10-year municipal bonds at par and classified the securities as available for sale. Interest revenue is received on June 30 and December 31. On December 31, 2024, these bonds were valued at $46 million. Nine months later, on October 3, 2025, Jefferson Corporation sold these bonds for $62 million. Instructions: Prepared the journal entries for: a. January 1, 2024 b. June 30, 2024, and December 31, 2024, for Interest Revenue c. adjusting the journal entry on December 31, 2024 (if necessary) d. The journal entries on October 3, 2025, when Jefferson Corporation sold these bonds for $62 million.

Answer 2

Question

Chapter 8, Problem 8.21AP

a

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The purchase price of the SP bonds paid by P

b

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The amount of gain or loss on bond retirement reported in consolidated income statement for 20X4.

c

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The necessary consolidated entries as of December 31, 20X4.

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Answer 3

Question

Chapter 8, Problem 8.21AP

a

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The purchase price of the SP bonds paid by P

b

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The amount of gain or loss on bond retirement reported in consolidated income statement for 20X4.

c

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The necessary consolidated entries as of December 31, 20X4.

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Answer 4

Question

Chapter 8, Problem 8.21AP

a

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The purchase price of the SP bonds paid by P

b

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The amount of gain or loss on bond retirement reported in consolidated income statement for 20X4.

c

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The necessary consolidated entries as of December 31, 20X4.

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Answer 5

Chapter 8, Problem 8.21AP

a

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The purchase price of the SP bonds paid by P

b

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The amount of gain or loss on bond retirement reported in consolidated income statement for 20X4.

c

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The necessary consolidated entries as of December 31, 20X4.

Answer 6

Chapter 8, Problem 8.21AP

a

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The purchase price of the SP bonds paid by P

Answer 7

Chapter 8, Problem 8.21AP

a

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The purchase price of the SP bonds paid by P

Answer 8

b

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The amount of gain or loss on bond retirement reported in consolidated income statement for 20X4.

Answer 9

b

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The amount of gain or loss on bond retirement reported in consolidated income statement for 20X4.

Answer 10

c

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The necessary consolidated entries as of December 31, 20X4.

Answer 11

c

To determine

Introduction: Intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary. In this case, it cannot sale of bonds to its subsidiary as an investment in its own bonds to itself, as the entity is now a consolidated entity, thus all amounts linked to intercompany obligation must be eliminated, including bonds investment, payable any unamortized discount or premium, the interest income or expenses or any accrued interest receivable or payable.

The necessary consolidated entries as of December 31, 20X4.

Answer 12

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Answer 14

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Answer 15

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

Solution Summary: The author explains that intercompany sale of bonds is a situation where the company sells its own bonds to its subsidiary.

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