On 1/1/18, Pam has $10,000 bonds outstanding with namortized premium of $100. Bonds mature in 5 years. am uses straight line amortization. Interest is 10%, ayable semi-annually. On 1/1/18, Sue acquires all of Pam's bonds on the open narket at $9500. Sue uses straight line amortization. Sue's net income for 2018 and 2019 is $220. equired:

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter4: Income Exclusions
Section: Chapter Questions
Problem 56P
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Pam owns 70% of Sue, acquired at book value.
On 1/1/18, Pam has $10,000 bonds outstanding with
unamortized premium of $100. Bonds mature in 5 years.
Pam uses straight line amortization. Interest is 10%,
payable semi-annually.
On 1/1/18, Sue acquires all of Pam's bonds on the open
market at $9500. Sue uses straight line amortization.
Sue's net income for 2018 and 2019 is $220.
Required:
• Show how this transaction is reflected on P's and S's actual
records;
Write the consolidation entries related to this transaction.
Transcribed Image Text:Pam owns 70% of Sue, acquired at book value. On 1/1/18, Pam has $10,000 bonds outstanding with unamortized premium of $100. Bonds mature in 5 years. Pam uses straight line amortization. Interest is 10%, payable semi-annually. On 1/1/18, Sue acquires all of Pam's bonds on the open market at $9500. Sue uses straight line amortization. Sue's net income for 2018 and 2019 is $220. Required: • Show how this transaction is reflected on P's and S's actual records; Write the consolidation entries related to this transaction.
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