Concept explainers
a
Introduction: 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
The amount paid by P to purchase S’s bonds.
b
Introduction: 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 are required to be prepared in the consolidated financial statement.
The
c
Introduction: 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 are required to be prepared in the consolidated financial statement.
The journal entry made by P in 20X6 to record its interest income on S bonds that it holds.
d.
Introduction: 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 are required to be prepared in the consolidated financial statement.
Elimination entry for interoperate bond ownership for consolidation worksheet for the year December 31 20X5.
e
Introduction: 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 are required to be prepared in the consolidated financial statement.
The amount on consolidated net income and income to controlling interest to be reported in income statement for 20X5 and 20X6.
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ADVANCED FINANCIAL ACCOUNTING IA
- Gonzalez Company acquired $210,000 of Walker Co., 5% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $44,400 of the bonds for 95. Journalize entries to record the following in Year 1: For a compound transaction, if an amount box does not require an entry, leave it blank. a. The initial acquisition of the bonds on May 1. May 1 fill in the blank 2db398fc5fbefe9_2 fill in the blank 2db398fc5fbefe9_4 b. The semiannual interest received on November 1. Nov. 1 fill in the blank 12a681fdb06bff7_2 fill in the blank 12a681fdb06bff7_4 c. The sale of the bonds on November 1. Nov. 1 fill in the blank cee7ff00dfa3fc5_2 fill in the blank cee7ff00dfa3fc5_3 fill in the blank cee7ff00dfa3fc5_5 fill in the blank cee7ff00dfa3fc5_6 fill in the blank cee7ff00dfa3fc5_8 fill in the blank cee7ff00dfa3fc5_9 d. The accrual of $1,380…arrow_forwardDemopoulos Company acquired $150,000 of Marimar Co., 6% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Demopoulos Company sold $55,000 of the bonds for 98. Journalize the entries to record the following: If an amount box does not require an entry, leave it blank. Question Content Area a. The initial acquisition of the bonds on May 1. May 1 Investments-Marimar Co. Bonds Investments-Marimar Co. Bonds Cash Cash Feedback Area Feedback a. Record the investment at par and the cash paid. Question Content Area b. The semiannual interest received on November 1. Nov. 1 Cash Cash Interest Revenue Interest Revenue Feedback Area Feedback b. Bond face amount x interest rate x part of a year = interest revenue (credit) and Cash (debit). Question Content Area c. The sale of the bonds on November 1. Nov. 1 Cash Cash…arrow_forwardGonzalez Company acquired $177,000 of Walker Co., 8% bonds on May 1 at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, Gonzalez Company sold $45,600 of the bonds for 97. Journalize entries to record the following in Year 1: For a compound transaction, if an amount box does not require an entry, leave it blank. a. The initial acquisition of the bonds on May 1. May 1 Investments-Walker Co. Bonds Cash Feedback a. Record the investment at par and the cash paid. b. The semiannual interest received on November 1. Nov. 1 Cash Interest Revenuearrow_forward
- Bula Investments acquired $260,400 of Effenstein Corp., 10% bonds at their face amount on October 1, 20Y1. The bonds pay interest on October 1 and April 1. On April 1, 20Y2, Bula sold $67,600 of Effenstein Corp. bonds at 103. Required: Journalize the entries to record the following: a. The initial acquisition of the Effenstein Corp. bonds on October 1, 20Y1.* b. The adjusting entry for 3 months of accrued interest earned on the Effenstein Corp. bonds on December 31, 20Y1.* c. The receipt of semiannual interest on April 1, 20Y2.* d. The sale of $67,600 of Effenstein Corp. bonds on April 1, 20Y2, at 103.* e. The receipt of the face value of the remaining bonds at their maturity on October 1, 20Y8.*arrow_forwardSatum Corporation issued $300,000 par value 10-year bonds at 107 on January 1, 20X3, which Star Corporation purchased On July 1, 20X7, Pluto Corporation purchased $120,000 face value of Saturn bonds from Star. The bonds pay 12 percent interest annually on December 31 The preparation of consolidated financial statements for Saturn and Pluto at December 31, 20X9, required the following consolidation entry Prentum on Bonds Payable Interest Income Investment in Saturn Corporation Bonds Interest Expense Investment in Saturn Corporation Stock MCI in Net Assets of Saturn Corporation 120,000 2,520 14,760 118,920 13,560 3,120 1,680 on the information given above, what percentage of the subsidiary's ownership does the parent company hold?arrow_forwardTorres Investments acquired $160,000 of Murphy Corp., 5% bonds at their face amount on October 1, Year 1. The bonds pay interest on October 1 and April 1. On April 1, Year 2, Torres sold $60,000 of Murphy Corp. bonds at 102.Journalize the entries to record the following:a. The initial acquisition of the Murphy Corp. bonds on October 1, Year 1.b. The adjusting entry for three months of accrued interest earned on the Murphy Corp.bonds on December 31, Year 1.c. The receipt of semiannual interest on April 1, Year 2.d. The sale of $60,000 of Murphy Corp. bonds on April 1, Year 2, at 102.arrow_forward
- Saturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1, 20X3, which Star Corporation purchased. On July 1, 20X7, Pluto Corporation purchased $120,000 face value of Saturn bonds from Star. The bonds pay 12 percent interest annually on December 31. The preparation of consolidated financial statements for Saturn and Pluto at December 31, 20X9, required the following consolidation entry: Bonds Payable Premium on Bonds Payable Interest Income Investment in Saturn Corporation Bonds Interest Expense Investment in Saturn Corporation Stock NCI in NA of Saturn Corp. Multiple Choice Based on the information given above, what amount did Pluto pay when it purchased the bonds on July 1, 20X7? $118.020 $118.920 $118.620 120,000 2,520 14,760 $117.220 118,920 13,560 3,120 1,680arrow_forwardSaturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1, 20X3, which Star Corporation purchased. On July 1, 20X7, Pluto Corporation purchased $120,000 face value of Saturn bonds from Star. The bonds pay 12 percent interest annually on December 31. The preparation of consolidated financial statements for Saturn and Pluto at December 31, 20X9, required the following consolidation entry: Bonds Payable Premium on Bonds Payable Interest Income Investment in Saturn Corporation Bonds Interest Expense Investment in Saturn Corporation Stock NCT in NA of Saturn Corp. Multiple Choice Based on the information given above, what amount of gain or loss on bond retirement is included in the 20X7 consolidated income $6,600 $4,800 16.000 120,000 2,520 14,760 $5,400 118,920 13,560 3,120 1,680arrow_forwardParilo Company acquired $183,600 of Makofske Company, 6% bonds on May 1, 20Y5, at their face amount. Interest is paid semiannually on May 1 and November 1. On November 1, 20Y5, Parilo sold $52,200 of the bonds for 96. Journalize the entries to record the following under the cost method:arrow_forward
- Packed Corporation owns 70 percent of Snowball Enterprises' stock. On January 1, 20X1, Packed sold $1.13 million par value, 6 percent (paid semiannually), 20-year, first mortgage bonds to Kling Corporation at 98. On January 1, 20X8, Snowball purchased $339,000 par value of the Packed bonds directly from Kling for $336,480. Required: Prepare the consolidation entry needed at December 31, 20X8, to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) X Answer is not complete. Accounts Debit Credit No A Event 1 Bonds payable 339,000 Interest income Loss on constructive bond retirement Investment in Packed Corporation bonds 336,674 Interest expense Discount on bonds payablearrow_forwardTanner-UNF Corporation acquired as a long-term investment $260.0 million of 7.0 % bonds, dated July 1, on July 1, 2024. Company management has the positive intent and ability to hold the bonds until maturity. Tanner-UNF paid $260.0 million for the bonds. The company will receive interest semiannually on June 30 and December 31. As a result of changing market conditions, the fair value of the bonds at December 31, 2024, was $240.0 million. Required: 1. How will Tanner-UNF's investment in the bonds on July 1, 2024 affect the financial statements? 2. How will Tanner-UNF's receipt of interest on December 31, 2024, affect the financial statements? 3. At what amount will Tanner-UNF report its investment in the December 31, 2024, balance sheet? 4. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to sell the investment on January 2, 2025, for $220.0 million. How will the sale of the bond investment affect Tanner-UNF's financial statements?…arrow_forwardOn 1/1/2019, Allie Company issued bonds payable of $500,000 at 8%. It was sold at $464,000 with effective interest rate of 9%. On 1/1/2020, Choco purchased all of Allie's bond for $532,000 cash with effective interest at 7% and Allie's bonds payable has been effectively retired. 3) Compute the consolidated gain or loss on a consolidated income statement for at the end of 2020arrow_forward
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