When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired. When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding. Requirement 1 The preparation of consolidation worksheet for 20X3

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Answer 1

Question

Chapter 8, Problem 8.23AP

a.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X3

b.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and statement of changes in retained earnings for 20X3

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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 $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…

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.

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 $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?

Answer 2

Question

Chapter 8, Problem 8.23AP

a.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X3

b.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and statement of changes in retained earnings for 20X3

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Answer 3

Question

Chapter 8, Problem 8.23AP

a.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X3

b.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and statement of changes in retained earnings for 20X3

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Answer 4

Question

Chapter 8, Problem 8.23AP

a.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X3

b.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and statement of changes in retained earnings for 20X3

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Answer 5

Chapter 8, Problem 8.23AP

a.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X3

b.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and statement of changes in retained earnings for 20X3

Answer 6

Chapter 8, Problem 8.23AP

a.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X3

Answer 7

Chapter 8, Problem 8.23AP

a.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 1

The preparation of consolidation worksheet for 20X3

Answer 8

b.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and statement of changes in retained earnings for 20X3

Answer 9

b.

To determine

Introduction: When an affiliate of the issuer later acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The bonds are not held outside the consolidated entity once another company within the consolidated entity purchases them, it must be treated as repurchase by the debtor. The acquisition of an affiliate’s bonds by another company within affiliated entities is referred to as constructive retirement. Although bonds are not actually retired.

When constructive retirement occurs the consolidated income statement reports gain or loss based on the difference between carrying value and purchase price paid by the affiliate to acquire it. And it is not reported in the consolidated balance sheet either as bond payable or as an investment because the bonds are no longer outstanding.

Requirement 2

The preparation of consolidated balance sheet, income statement and statement of changes in retained earnings for 20X3

Answer 10

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Answer 11

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Answer 13

Ch. 8 - Prob. 8.1Q Ch. 8 - What is meant by a constructive bond retirement in...Ch. 8 - Prob. 8.3Q Ch. 8 - Prob. 8.4Q Ch. 8 - When a parent company sells land to a subsidiary...Ch. 8 - Prob. 8.7Q Ch. 8 - Prob. 8.8Q Ch. 8 - Prob. 8.9Q Ch. 8 - Prob. 8.10Q Ch. 8 - Prob. 8.11Q

Solution Summary: The author explains that when an affiliate of the issuer acquires bonds from an unrelated party, the bonds are retired at the time of purchase. The consolidated income statement reports gain or loss based on the difference between carrying value and

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