Multiple−Choice Questions (Effective Interest Method)
On January 1, 20X4, Passive Heating Corporation paid $104,000 for $100,000 par
Passive reported operating income (excluding income from subsidiary) of $50,000, and Solar reported net income of $30,000 for 20X4.
Required
Select the correct answer for each of the following questions.
3. Income assigned to the noncontrolling interest in the 20X4 consolidated income statement should be
a. $6,534.
b. $8,321.
c. $8,388.
d. $16,826.
Want to see the full answer?
Check out a sample textbook solutionChapter 8 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- On July 1, 20x3, Wenna Inc. purchased as a short-term investment a P 1,000,000 face value Keizen Co. 8% bond for P 910,000 plus accrued interest to yield 10%. The bonds mature on January 1, 20x10, pay interest annually on January 1, and are classified as Debt Investments @ Fair Value through Profit or Loss. On December 31, 20x3, the bonds had a fair value of P 945,000. On February 13, 20x4, Wenna sold the bonds for P 920,000. On July 1, 20x3, how much cash was paid by Wenna Inc. in connection with the purchase of the Debt Investments?arrow_forward3. On October 1, Dennis Company purchased P200,000 face value 12% bonds for 98 plus accrued interest and brokerage fees and classified them as held-to-maturity securities. Interest is paid semiannually on January 1 and July 1. Brokerage fees for this transaction were P700. At what amount should this acquisition of bonds be recorded? a. P196,000 b. P196,700 c. P202,000 d. P202,700arrow_forwardPat Inc. purchased the $100.000 face value outstanding bonds of Slinger Company, its 80%-owned subsidiary, fo $101.300 (to yield 7.5% annual interest) on January 1, 20X3. The bonds have a stated nominal interest rate of 8°. The bonds were sold on January 1, 20X1, for $101,005 to yield 7.75% annual interest. The bonds mature on Janu 20X6. The bonds pay interest each January 1. Amortizations of premiums are done using the effective interest "amortization method. Instructions: 1. Prepare the 5-year amortization schedule for the bonds issued by Slinger. 7.75% Interest 2. 3. 4. Date 1/1/X1 1/1/X2 1/1/X3 1/1/X4 1/1/X5 1/1/X6 Payment 8,000 8,000 8,000 8,000 8,000 Prepare the 3-year amortization schedule for the bonds purchased by Pat Inc. Date Payment 7.5% Interest 1/1/X3 1/1/X4 Amortization 1/1/X5 1/1/X6 Amortization 8,000 8,000 8,000 Record the entries made by Slinger in 20X3 relative to the bonds. Record the entries made by Pat Inc. in 20X3 relative to the bonds. Balance 101,005 Balance…arrow_forward
- Sibling Company issued $540,000 par value, 10-year bonds at 103 on January 1, 20X3, which Mega Corporation purchased. The coupon rate on the bonds is 9 percent. Interest payments are made semiannually on July 1 and January 1. On July 1, 20X6, Parent Company purchased $216,000 par value of the bonds from Mega for $208, 200. Parent owns 60 percent of Sibling's voting shares. Required: What amount of gain or loss will be reported in Sibling's 20X6 income statement on the retirement of bonds? Will a gain or loss be reported in the 20X6 consolidated financial statements for Parent for the constructive retirement of bonds? What amount will be reported? How much will Parent's purchase of the bonds change consolidated net income for 20X6? Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements at December 31, 20X6. Prepare the worksheet consolidation entry or entries needed to remove…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. a. The initial acquisition of the bonds on May 1. b. The semiannual interest received on November 1. c. The sale of the bonds on November 1. d. The accrual of $950 interest on December 31.arrow_forwardUse this information for Pierce Company to answer the question that follow. On May 1, Pierce Company purchased $60,000 of Stanton Company's 12% bonds at 100 plus accrued interest of $2,400. On June 30, Pierce received its first semiannual interest. On February 1, Pierce sold $50,000 of the bonds at 103 plus accrued interest. What are the total proceeds from the February 1 sale? Oa. $51,500 Ob. $50,000 Oc. $52,400 Od. $52,000 ?arrow_forward
- Suspect Company issued $1,110,000 of 8 percent first mortgage bonds on January 1, 20X1, at 104. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $740,000 of Suspect’s bonds from the original purchaser on December 31, 20X5, for $736,000. Prime owns 70 percent of Suspect’s voting common stock. Required:a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X5 b. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X6.arrow_forwardSuspect Company issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $400,000 of Suspect's bonds from the original purchaser on December 31, 20X5, for $397,000. Prime owns 60 percent of Suspect's voting common stock. Note: Assume using straight-line amortization of bond discount or premium. Required: a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X5. b. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X6. Complete this question by entering your answers in the tabs below. Required A Required B Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond…arrow_forwardSuspect Company Issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay Interest semiannually on January 1 and July 1. Prime Corporation purchased $400,000 of Suspect's bonds from the original purchaser on December 31, 20X5, for $397,000. Prime owns 60 percent of Suspect's voting common stock. Note: Assume using straight-line amortization of bond discount or premium. Required: a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the Intercorporate bond ownership In preparing consolidated financial statements for 20X5. (If no entry is required for a transaction/event, select "No journal entry required" In the first account field.) Answer is complete and correct. No Event A 1 Bonds payable Premium on bonds payable Accounts Debit Credit 400,000 9,000 Investment in Suspect Company bonds Gain on bond retirement 397,000 12,000 B 2 Interest payable Interest receivable 18,000 18,000 b. Prepare the…arrow_forward
- Pretzel Corporation owns 60 percent of Stick Corporation's voting shares. On January 1, 20X2, Pretzel Corporation sold $150,000 par value, 6 percent first mortgage bonds to Stick for $156,000. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1. Note: Assume using straight-line amortization of bond discount or premium. Required: a. Prepare the journal entries for 20X2 for Stick related to its ownership of Pretzel's bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 Record the investment in the bonds of Pretzel Corporation. Note: Enter debits before credits. Date January 1, 20X2 General Journal Debit Credit Record entry View general journal Clear entry > b. Prepare the journal entries for 20X2 for Pretzel related to the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account…arrow_forwardOn January 1, 20x1, Eduard Co. acquired 12%, P4,000,000 bonds for P4,198,948. The principal is due on December 31, 20x3 but interest is made annually starting December 31, 20x1. The effective interest rate on the bonds is 10%.13. How much is the interest income recognized in 20x1?a. 419,895b. 413,884c. 407,273d. 480,00014. How much is the carrying amount of the investment on December 31, 20x1?a. 4,198,948b. 4,138,843c. 4,072,727d. 4,000,000arrow_forwardSuspect Company issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $400,000 of Suspect's bonds from the original purchaser on January 1, 20X5, for $396,800. Prime owns 60 percent of Suspect's voting common stock. Note: Assume using straight-line amortization of bond discount or premium. Required: a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X5. b. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X6. Complete this question by entering your answers in the tabs below. Required A Required B Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education