ADV.FIN.ACCT.LL W/CONNECT+PROCTORIO PLUS
12th Edition
ISBN: 9781266380570
Author: Christensen
Publisher: MCG
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Question
Chapter 8, Problem 8.7E
a.
To determine
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
Bond: Bond is an instrument issued by the companies to fulfil their need of large amount of borrowings. It is the instrument of indebtedness where issuer is obliged to pay the interest on it.
Loss or gain on bond retirement: When a company buyback its bonds for certain purpose, then it is called bond retirement. Loss or gain in bond retirement is difference between the carrying amount of both the companies i.e. issuing company and purchasing company.
The
b.
To determine
Introduction: Consolidation is the process of combining financial results of various subsidiaries with the financial results of parent company. It is used only when parent company holds more than 50% of share of subsidiary company.
Loss or gain on bond retirement: When a company buyback its bonds for certain purpose, then it is called bond retirement. Loss or gain in bond retirement is difference between the carrying amount of both the companies i.e. issuing company and purchasing company.
The journal entries needed to remove the effect of intercompany bond transactions for 20X6.
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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.
Note: Assume using straight-line amortization of bond discount or premium.
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.)
Answer is complete and correct.
No
Event
A
1
Bonds payable
Premium on bonds payable
Accounts
Debit
Credit
400,000
9,000
Investment in Suspect Company bonds
Gain on bond retirement
397,000
12,000
B
2
Interest payable
Interest receivable
18,000
18,000
b. Prepare the…
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.
Note: Assume using straight-line amortization of bond discount or premium.
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.
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…
Chapter 8 Solutions
ADV.FIN.ACCT.LL W/CONNECT+PROCTORIO PLUS
Ch. 8 - Prob. 8.1QCh. 8 - What is meant by a constructive bond retirement in...Ch. 8 - Prob. 8.3QCh. 8 - Prob. 8.4QCh. 8 - When a parent company sells land to a subsidiary...Ch. 8 - Prob. 8.7QCh. 8 - Prob. 8.8QCh. 8 - Prob. 8.9QCh. 8 - Prob. 8.10QCh. 8 - Prob. 8.11Q
Ch. 8 - How is the amount of income assigned to the...Ch. 8 - Prob. 8.13QCh. 8 - How would the relationship between interest income...Ch. 8 - Prob. 8.15QCh. 8 - Prob. 8.16QCh. 8 - Prob. 8.17QCh. 8 - Prob. 8.18QCh. 8 - Prob. 8.1CCh. 8 - Prob. 8.2CCh. 8 - Prob. 8.4CCh. 8 - Prob. 8.1ECh. 8 - Bond Sale from Parent to Subsidiary (StraightLine...Ch. 8 - Computation of Transfer Price (Effective Interest...Ch. 8 - Prob. 8.2AECh. 8 - Prob. 8.3ECh. 8 - Bond Sale at Discount (Straightline Method) Assume...Ch. 8 - Evaluation of Intercorporate Bond Holdings...Ch. 8 - Prob. 8.5.1ECh. 8 - Prob. 8.5.2ECh. 8 - MultipleChoice Questions (Effective Interest...Ch. 8 - Prob. 8.5.4ECh. 8 - Prob. 8.5.5ECh. 8 - Prob. 8.5.6ECh. 8 - Prob. 8.5.1AECh. 8 - Prob. 8.5.2AECh. 8 - Prob. 8.5.3AECh. 8 - Prob. 8.5.4AECh. 8 - Prob. 8.6.1ECh. 8 - Prob. 8.6.2ECh. 8 - MultipleChoice Questions (Effective Interest...Ch. 8 - Prob. 8.6.1AECh. 8 - Prob. 8.6.2AECh. 8 - Prob. 8.6.3AECh. 8 - Prob. 8.7ECh. 8 - Prob. 8.7AECh. 8 - Prob. 8.8ECh. 8 - Prob. 8.8AECh. 8 - Prob. 8.9ECh. 8 - Prob. 8.9AECh. 8 - Prob. 8.10ECh. 8 - Prob. 8.10AECh. 8 - Prob. 8.11ECh. 8 - Prob. 8.11AECh. 8 - Evaluation of Bond Retirement (Effective Interest...Ch. 8 - Prob. 8.12AECh. 8 - Prob. 8.13ECh. 8 - Prob. 8.13AECh. 8 - Prob. 8.14PCh. 8 - Prob. 8.14APCh. 8 - Prob. 8.15PCh. 8 - Prob. 8.15APCh. 8 - Prob. 8.16PCh. 8 - Prob. 8.16APCh. 8 - Prob. 8.17PCh. 8 - Prob. 8.17APCh. 8 - Prob. 8.18PCh. 8 - Prob. 8.18APCh. 8 - Prob. 8.19APCh. 8 - Prob. 8.20PCh. 8 - Prob. 8.20APCh. 8 - Prob. 8.21PCh. 8 - Prob. 8.21APCh. 8 - Prob. 8.22APCh. 8 - Prob. 8.22BPCh. 8 - Prob. 8.23PCh. 8 - Prob. 8.23APCh. 8 - Prob. 8.24PCh. 8 - Prob. 8.24APCh. 8 - Intercorporate Inventory and Debt Transfers...Ch. 8 - Intercorporate Inventory and Debt Transfers...Ch. 8 - Prob. 8.26PCh. 8 - Prob. 8.26APCh. 8 - Prob. 8.27.1BPCh. 8 - Prob. 8.27.2BPCh. 8 - Prob. 8.27.3BPCh. 8 - Prob. 8.27.4BPCh. 8 - Prob. 8.27.5BPCh. 8 - Prob. 8.27.6BPCh. 8 - Prob. 8.27.7BPCh. 8 - Prob. 8.27.8BPCh. 8 - Prob. 8.27.9BPCh. 8 - Prob. 8.27.10BPCh. 8 - Prob. 8.28PCh. 8 - Prob. 8.28APCh. 8 - Prob. 8.29BPCh. 8 - Prob. 8.30BP
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