Concept explainers
a
Interest income and expense: 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. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.
If the bonds purchased by S were at par or premium.
b
Interest income and expense: 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. When the nominal interest rate is different from yield demanded, the bond is sold at discount or premium. In this case, the amount of bond interest income or expense recorded will not be equal, in this case, the interest receipt and payment is adjusted for the amortization of the discount or premium.
if the subsidiary bonds were originally sold at premium or discount, will annual interest payment received by S is more or less than interest expense. How is the difference between interest income recorded by S and how interest expense is recorded by subsidiary.

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Chapter 8 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- Blockbuster Co is building a new state of the art cineplex at a cost of $3,500,000.They received a capital investment of $1,500,000. The remainder of funds will haveto be borrowed so they decided to issue bonds. They have issued 10.5%, 5-yearbonds. These bonds were issued on January 1st, 2020, and pay semi-annual intereston July 1st and January 1st. The bonds yield 10%. The year end is December 31st Calculate the proceeds from the sale of the bond. Clearly show theamount of the premium or discount and state two reasons which supportthe premium or discount calculatedarrow_forwardGeneral accounting questionarrow_forwardNeed help with this question solution general accountingarrow_forward
- Blockbuster Co is building a new state of the art cineplex at a cost of $3,500,000.They received a capital investment of $1,500,000. The remainder of funds will haveto be borrowed so they decided to issue bonds. They have issued 10.5%, 5-yearbonds. These bonds were issued on January 1st, 2020, and pay semi-annual intereston July 1st and January 1st. The bonds yield 10%. The year end is December 31starrow_forwardHi expert please give me answer general accounting questionarrow_forwardGeneral Accountingarrow_forward
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