Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired. When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding. Requirement 1 The preparation of consolidation worksheet for 20X4

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Answer 1

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.24AP

a.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X4

b.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and retained earnings statement for 20X4

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Suspect Company Issued $720,000 of 8 percent first mortgage bonds on January 1, 20X1, at 105. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $480,000 of Suspect's bonds from the original purchaser on January 1, 20X5, for $473,000. Prime owns 60 percent of Suspect's voting common stock. Required: a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X5. b. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X6. Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements…

Suspect Company Issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay Interest semiannually on January 1 and July 1. Prime Corporation purchased $400,000 of Suspect's bonds from the original purchaser on December 31, 20X5, for $397,000. Prime owns 60 percent of Suspect's voting common stock. Required: a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X5. (If no entry is required for a transaction/event, select "No Journal entry required" In the first account fleld. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) No A B No A Event 1 B 2 Event 1 2 Bonds payable Premium on bonds payable Investment in Suspect Company bonds Gain on bond retirement Interest payable Answer is complete but not entirely correct. Accounts Interest receivable b. Prepare the worksheet…

Suspect Company Issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay Interest semiannually on January 1 and July 1. Prime Corporation purchased $400,000 of Suspect's bonds from the original purchaser on December 31, 20X5, for $397,000. Prime owns 60 percent of Suspect's voting common stock. Required: a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X5. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field. Do not round your Intermediate calculations. Round your final answers to nearest whole dollar.) Answer is complete but not entirely correct. No Event A 1 Bonds payable Premium on bonds payable Accounts Investment in Suspect Company bonds Gain on bond retirement B 2 Interest payable Interest receivable Debit Credit 400,000 9,000 397,000 9,000…

Answer 2

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.24AP

a.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X4

b.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and retained earnings statement for 20X4

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.24AP

a.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X4

b.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and retained earnings statement for 20X4

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.24AP

a.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X4

b.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and retained earnings statement for 20X4

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Answer 5

Chapter 8, Problem 8.24AP

a.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X4

b.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and retained earnings statement for 20X4

Answer 6

Chapter 8, Problem 8.24AP

a.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X4

Answer 7

Chapter 8, Problem 8.24AP

a.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X4

Answer 8

b.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and retained earnings statement for 20X4

Answer 9

b.

To determine

Introduction:

Bonds of affiliate purchased from non-affiliate: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and retained earnings statement for 20X4

Answer 10

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Answer 11

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Answer 12

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Answer 13

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 when an affiliate acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The consolidated income statement reports gain or loss based on the difference between carrying value and purchase price.

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