Concept explainers
a
Intercompany sale of bonds: 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. Thus when the consolidated entity is viewed as a single company, all amounts related to intercompany indebtedness are eliminated.
Actual bond retirement: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. This is referred to as retirement of bond, as a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company, all amounts related to intercompany indebtedness are eliminated.
The preparation of
b
Intercompany sale of bonds: 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. Thus when the consolidated entity is viewed as a single company, all amounts related to intercompany indebtedness are eliminated.
Actual bond retirement: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. This is referred to as retirement of bond, as a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company, all amounts related to intercompany indebtedness are eliminated.
the preparation of journal entries for 20X2 for P related to bonds.
c
Intercompany sale of bonds: 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. Thus when the consolidated entity is viewed as a single company, all amounts related to intercompany indebtedness are eliminated.
Actual bond retirement: When intercompany sale of bonds takes place between affiliates, all effects of intercompany indebtedness must be eliminated for the purpose of consolidated financial statements. This is referred to as retirement of bond, as a company cannot report an investment in its own bonds or bond liability to itself. Thus when the consolidated entity is viewed as a single company, all amounts related to intercompany indebtedness are eliminated.
the preparation elimination entries for consolidation worksheet as on December 31 20X2.
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Advanced Financial Accounting
- Parent Company issued 10-year, 15% bonds with a par value of $500,000 on January 1, 2020 for $470,000. Interest is paid semiannually on June 30 and December 31. On December 31, 2021, $400,000 of the par value bonds were purchased by Sub Company for $410,000. Sub Company is an 80% subsidiary of the Parent Company. Both companies use straight-line method to amortized bond premiums and discounts. The total amount of constructive loss allocated to the Parent Company isarrow_forwardSamba Corporation is a 80% owned subsidiary of Pamba Corporation. On January 2, 2015, Samba purchased $600,000 par of Pamba’s $900,000 outstanding bonds for $705,000 in the bond market. Pamba’s bonds have an 8 percent interest rate, pay interest on January 1 and July 1, and mature on January 1, 2019. There was $45,000 unamortized premium on the bond issue on January 1, 2015. Assume straight-line amortization. The constructive gain or loss that should appear in the consolidated income statement of Pamba Corporation and Subsidiary for 2015 is: Question 7Answer a. $51,000 gain b. $48,000 gain c. $55,000 loss d. $45,000 lossarrow_forwardPorter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 60,000 shares of its own common stock outstanding. During the current year, Porter earns net income (without any consideration of its investment in Street) of $150,000 while Street reports $130,000. Annual amortization of $10,000 is recognized each year on the consolidation worksheet based on acquisition-date fair-value allocations. Both companies have convertible bonds outstanding. During the current year, bond-related interest expense (net of taxes) is $32,000 for Porter and $24,000 for Street. Porter’s bonds can be converted into 8,000 shares of common stock; Street’s bonds can be converted into 10,000 shares. Porter owns none of these bonds. What are the earnings per share amounts that Porter should report in its current year consolidated income statement?arrow_forward
- Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 60,000 shares of its own common stock outstanding. During the current year, Porter earns net income (without any consideration of its investment in Street) of $213,000 while Street reports $193,000. Annual amortization of $10,000 is recognized each year on the consolidation worksheet based on acquisition-date fair-value allocations. Both companies have convertible bonds outstanding. During the current year, bond-related interest expense (net of taxes) is $53,000 for Porter and $45,000 for Street. Porter’s bonds can be converted into 7,000 shares of common stock; Street’s bonds can be converted into 10,000 shares. Porter owns none of these bonds. What are the earnings per share amounts that Porter should report in its current year consolidated income statement? Compute diluted EPS only.arrow_forwardPar Corporation holds 60 percent of Short Publishing Company’s voting shares. Par issued $550,000 of 10 percent bonds with a 10-year maturity on January 1, 20X2, at 94. On January 1, 20X8, Short purchased $110,000 of the Par bonds for $116,000. Partial trial balances for the two companies on December 31, 20X8, are as follows: Note: Assume using straight-line amortization of bond discount or premium. ParCorporation ShortPublishing Company Investment in Short Publishing Company Stock $ 138,000 Investment in Par Corporation Bonds $ 115,500 Bonds Payable 550,000 Discount on Bonds Payable 18,000 Interest Expense 50,000 Interest Income 9,100 Interest Payable 20,000 Interest Receivable 5,500 Required:Prepare the worksheet consolidation entry or entries needed on December 31, 20X8, to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements.…arrow_forwardPorter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 60,000 shares of its own common stock outstanding. During the current year, Porter earns net income (without any consideration of its investment in Street) of $177,000 while Street reports $157,000. Annual amortization of $10,000 is recognized each year on the consolidation worksheet based on acquisition-date fair-value allocations. Both companies have convertible bonds outstanding. During the current year, bond-related interest expense (net of taxes) is $41,000 for Porter and $33,000 for Street. Porter’s bonds can be converted into 7,000 shares of common stock; Street’s bonds can be converted into 10,000 shares. Porter owns none of these bonds. What are the earnings per share amounts that Porter should report in its current year consolidated income statement? (Round your answers to 2 decimal places.) Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has…arrow_forward
- Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 65,000 shares of its own common stock outstanding. During the current year, Porter earns net income (without any consideration of its investment in Street) of $239,000 while Street reports $191,000. Annual amortization of $14,000 is recognized each year on the consolidation worksheet based on acquisition-date fair-value allocations. Both companies have convertible bonds outstanding. During the current year, bond-related interest expense (net of taxes) is $51,000 for Porter and $43,000 for Street. Porter’s bonds can be converted into 8,000 shares of common stock; Street’s bonds can be converted into 10,000 shares. Porter owns none of these bonds. What are the earnings per share amounts that Porter should report in its current year consolidated income statement? (Round your answers to 2 decimal places.) Basic and dilutedarrow_forwardABC Company , a holder of P1,000,000 XYZ Company bonds, collected the interest due on March 31, year 1, and then sold the bonds to W, Inc. for P975,000. On that date, XYZ, a 75% owner of W had P1,075,000 carrying amount for the bonds. What was the effect of W's purchase of XYZ's bond on the retained earnings amount reported in XYZ's March 31, year 1 consolidated balance sheet? (Answer format: amount increase/decrease e.g. 10000 decrease, if no effect, just type 0) What was the effect of W's purchase of XYZ's bond on the noncontrolling interest amount reported in XYZ's March 31, year 1 consolidated balance sheet? (Answer format: amount increase/decrease e.g. 10000 decrease, if no effect, just type 0) * Pls answer in good acctg form. Ty!arrow_forwardargus Corporation owned 61% of the voting common stock of Sanatee, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price.On January 1, 2020, Sanatee sold $1,800,000 in ten-year bonds to the public at 108. The bonds pay a 10% interest rate every December 31. Fargus acquired 40% of these bonds on April 1, 2022, for 95% of the face value. Both companies utilized the straight-line method of amortization. a. Prepare amortization tables for Fargus (4/1/2022 to 12/31/2023) and Sanatee (1/1/2020 to 12/31/2023) b. Determine whether this is gain/loss on retirement of bond on April 1 2022 c. Determine the consolidated interest expense on Dec 31 2022 d. If Fargus has net income $200,000 and Sanatee has net income $50,000 in 2022, how much is the consolidated net income? e. What consolidation entry would be recorded in connection…arrow_forward