Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated. When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium. Requirement 1 amount of interest expense should be reported in the year 20X4 consolidated income statement.

Question

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Answer 1

Question

Chapter 8, Problem 8.3E

a

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 1

amount of interest expense should be reported in the year 20X4 consolidated income statement.

b

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 2

The entries P record during 20X4 with regards to investment in S bonds.

c

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 3

necessary consolidation entries needed to eliminate intercompany bond ownership for 20X4

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A business has revenue of $895,000, cost of goods sold of $356,000, operating expenses of $198,000, and pays $82,000 in taxes, what is the net income?

Answer 2

Question

Chapter 8, Problem 8.3E

a

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 1

amount of interest expense should be reported in the year 20X4 consolidated income statement.

b

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 2

The entries P record during 20X4 with regards to investment in S bonds.

c

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 3

necessary consolidation entries needed to eliminate intercompany bond ownership for 20X4

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Answer 3

Question

Chapter 8, Problem 8.3E

a

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 1

amount of interest expense should be reported in the year 20X4 consolidated income statement.

b

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 2

The entries P record during 20X4 with regards to investment in S bonds.

c

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 3

necessary consolidation entries needed to eliminate intercompany bond ownership for 20X4

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Answer 4

Question

Chapter 8, Problem 8.3E

a

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 1

amount of interest expense should be reported in the year 20X4 consolidated income statement.

b

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 2

The entries P record during 20X4 with regards to investment in S bonds.

c

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 3

necessary consolidation entries needed to eliminate intercompany bond ownership for 20X4

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Answer 5

Chapter 8, Problem 8.3E

a

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 1

amount of interest expense should be reported in the year 20X4 consolidated income statement.

b

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 2

The entries P record during 20X4 with regards to investment in S bonds.

c

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 3

necessary consolidation entries needed to eliminate intercompany bond ownership for 20X4

Answer 6

Chapter 8, Problem 8.3E

a

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 1

amount of interest expense should be reported in the year 20X4 consolidated income statement.

Answer 7

Chapter 8, Problem 8.3E

a

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 1

amount of interest expense should be reported in the year 20X4 consolidated income statement.

Answer 8

b

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 2

The entries P record during 20X4 with regards to investment in S bonds.

Answer 9

b

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 2

The entries P record during 20X4 with regards to investment in S bonds.

Answer 10

c

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 3

necessary consolidation entries needed to eliminate intercompany bond ownership for 20X4

Answer 11

c

To determine

Bond sale directly to an affiliate: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. As a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company all amounts related to intercompany indebtedness are eliminated.

When the coupon or nominal interest rate on a bond is different from the yield, a bond is said to be sold at discount or premium, in this cases the amount of interest income and expense recorded no longer equals to interest payments. In that case interest income or expense are adjusted for the amortization of the discount or premium.

Requirement 3

necessary consolidation entries needed to eliminate intercompany bond ownership for 20X4

Answer 12

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Answer 13

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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 how the effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements.

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