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Franklin Corporation owns 90 percent of the outstanding voting stock of Georgia

ID: 2446882 • Letter: F

Question

Franklin Corporation owns 90 percent of the outstanding voting stock of Georgia Company. On January 2, 2009, Georgia sold 7 percent bonds payable with a $5,000,000 face value maturing January 2, 2029 at a premium of $500,000. On January 1, 2011, Franklin acquired 20 percent of these same bonds on the open market at 97.66. Both companies use the straight-line method of amortization. What adjustment should be made to Franklin's 2012 beginning Retained Earnings as a result of this bond acquisition?  The answer is 107,100. what are the steps?

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142 answers

[To record the acquisition of bond]

How did you get the retained earnings in this problem?

Date Account title Debit ($) Credit ($) Bonds payable [5000000*20%*0.9]     900,000 Bond premium [50000*20%*3]       30,000 Retained earnings (G)     107,100 Retained earnings (G)       37,160 Bond investment [5500000*20%*97.66%]    1,074,260

[To record the acquisition of bond]

How did you get the retained earnings in this problem?

Explanation / Answer

The confidence interval in Question 57 is based on the assumption of a large sample size. Is this sample size sufficiently large in this example? Explain how you arrived at your answer.

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