Concept explainers
a
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated
Requirement 1
The entries in the books of P related to investment in S for the year 20X2.
b
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in consolidated financial statement.
Requirement 2
The entries in books of P related to bond payable for 20X2.
c
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in consolidated financial statement.
Requirement 3
The entries in books of T related to investment in P’s bonds for 20X2.
d
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in consolidated financial statement.
Requirement 4
The entries elimination entries to complete consolidation worksheet for 20X2.
e
Introduction:
Intercompany sale of bonds: When a company sells bonds to its subsidiary, all effects of the intercompany obligation must be eliminated. When the consolidated entity is viewed as a single company, all amounts related to obligations of consolidating companies on each other be eliminated, including all amounts related to intercompany investments.
Retirement of bonds: When a constrictive retirement takes place, the consolidated income statement for the year shows the profit or loss on retirement, but not reported in the consolidated balance sheet, if the company purchases the bond of a related company from an unrelated party at a price equal to the value reported, the elimination entries required to be prepared in consolidated financial statement.
Requirement 5
The preparation of consolidation worksheet for 20X2
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Chapter 8 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- What amount will be shown on the July 1, 20X1, consolidated balance sheet for the following: Total equity Now assume this transaction had been completed prior to the elimination of poolings of interest, and that the pooling method had been used to record the acquisition. Redo requirements 1 and 2: Total assets Total liabilities Total equityarrow_forwardBonds Payable has a balance of $987,000 and Premium on Bonds Payable has a balance of $10,857. If the issuing corporation redeems the bonds at 102, what is the amount of gain or loss on redemption? Select the correct answer. a-$10,857 loss b-$8,883 gain c-$10,857 gain d-$8,883 lossarrow_forwardIf bonds with a face value of $124000 are converted into common stock when the carrying value of the bonds is $118000, the entry to record the conversion will include a debit to O Bonds Payable equal to the market price of the bonds on the date of conversion. O Bonds Payable for $124000. O Discount on Bonds Payable for $6000. O Bonds Payable for $118000. eTextbook and Media Save for Later Attempts: 0 of 2 used Submit Answer @ 3 4 5 6 7 W e у S g h j k V b n m alt ctrlarrow_forward
- Bonds Payable has a balance of $951,000 and Discount on Bonds Payable has a balance of $11,412. If the issuing corporation redeems the bonds at 98, what is the amount of gain or loss on redemption? a.$7,608 loss b.$7,608 gain c.$11,412 gain d.$11,412 lossarrow_forwardConsolidation adjustment necessary when affiliate's debt is acquired from non-affiliate Assume that a Parent company owns 65 percent of its Subsidiary. The parent company uses the equity method to account for its Equity investment. On January 1, 2015, the Parent (face) 10 year, 10 percent bonds payable for a $100,000 premium. The bonds pay interest on December 31 of each year. On January 1, 2018, amortization. In preparing the consolidated financial statements for the year ended December 31, 2019, what consolidating entry adjustment is necessary the Subsidiary $0 + Please answer all parts of the question. $2,000,000 use straight-line company issued to an unaffiliated company acquired 30 percent of the bonds for $572,000. Both companies for the beginning-of-year Equity investment balance?arrow_forwardodwill to be amortized periodically for 20 years. G. Goodwill to be amortized for 40 years D. Expenses immediately. B. Goodwill not subject to amortization but subject to impairment. 3. Two methods of arranging business combinations: C. Acquisition and uniting of interest D. Merger and acquisition of stocks A/ Merger and consolidation B. Consolidation and Acquisition of stocks . The cost of registering equity securities in a business combination should be recorded as: A. An income of the period B. An expense of the period C. Deduction from additional paid-in capital D. Part of the cost of the stock acquired 5. In acquisition-type combination, the appropriate accounting for the excess of fair values of net assets acquired er the price paid is to: A. Recognize as income in the books of the acquirer B. Recognize as additional paid-in capital in the books of the acquirer blbe C. Reduce proportionately current fair values assigned to the acquiree's non-current assets any remaining excess as…arrow_forward
- Bonds Payable has a balance of $867,000 and Premium on Bonds Payable has a balance of $9,537. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption? Oa. $16,473 loss Ob. $9,537 gain Oc. $893,010 gain Od. $9,537 lossarrow_forwardOn January 1 of the current year, an entity issued bonds at discount. The entity incorrectly used the straight line method instead of the effective interest method to amortize the discount. How were the following amounts, as of December 31 of the current year affected by the error? *a. Carrying Amount of Bonds = Overstated; Retained Earnings = Overstatedb. Carrying Amount of Bonds = Understated; Retained Earnings = Overstatedc. Carrying Amount of Bonds = Overstated; Retained Earnings = Understatedd. Carrying Amount of Bonds = Understated; Retained Earnings = Understatedarrow_forwardDebt investment transactions, available-for-sale valuationSoto Industries Inc. in an athletic foot ware company that beganoperations on January 1, Year 1. The following transactions relate to debtinvestments acquired by Solo Industries Inc., which has a fiscal yearending on December 31: Instructions1. Journalize the entries to record these transactions.2. If the bond portfolio is classified as available for sale, what impactwould this have on financial statement disclosure?arrow_forward
- A parent company buys bonds on the open market that had been previously issued by its subsidiary. The price paid by the parent is less than the carrying amount of the bonds on the subsid-iary’s records. How should the parent report the difference between the price paid and the carrying amount of the bonds on its consolidated financial statements?a. As a loss on retirement of the bonds.b. As a gain on retirement of the bonds.c. As an increase to interest expense over the remaining life of the bonds.d. Because the bonds now represent intra-entity debt, the difference is not reportedarrow_forwardJournalize the entries to record the following: If an amount box does not require an entry, leave it blank. a. The initial acquisition of the bonds on May 1. May 1 b. The semiannual interest received on November 1. Nov. 1 c. The sale of the bonds on November 1. Nov. 1 d. The accrual of $1,360 interest on December 31. Dec. 31arrow_forwardView Policies Current Attempt in Progress If bonds with a face value of $124000 are converted into common stock when the carrying value of the bonds is $118000, the entry to record the conversion will include a debit to O Bonds Payable equal to the market price of the bonds on the date of conversion. O Bonds Payable for $124000. O Discount on Bonds Payable for $6000. O Bonds Payable for $118000. eTextbook and Media Save for Later Attempts: 0 of 2 used Submit Answer 4 5 6 7 8 9 e C b narrow_forward
Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning