Opus, Incorporated, owns 80 percent of Bloom Company. On December 31, 2017, Opus

Question

Opus, Incorporated, owns 80 percent of Bloom Company. On December 31, 2017, Opus acquires half of Bloom's $670,000 outstanding bonds. These bonds had been sold on the open market on January 1, 2015, at a 12 percent effective rate. The bonds pay a cash interest rate of 10 percent every December 31 and are scheduled to come due on December 31, 2027. Bloom issued this debt originally for $583,924. Opus paid $373,502 for this investment, indicating an 8 percent effective yield. a. Assuming that both parties use the effective rate method, what gain or loss from the retirement of this debt should be reported on the consolidated income statement for 2017? on Opus's records and the Bonds Payable account of Bloom as of December 31, 2018? because of these bonds? Assume that the parent is not applying the equity method. b. Assuming that both parties use the effective rate method, what balances should appear in the Investment in Bloom Bonds account c. Assuming that both parties use the straight-line method, what consolidation entry would be required on December 31, 2018, Complete this question by entering your answers in the tabs below Required A Required B Required C Assuming that both parties use the effective rate method, what gain or loss from the retirement of this debt should be reported on the consolidated income statement for 2017? (Round your intermediate calculations to the nearest dollar amount.)

Explanation / Answer

Because both has the effective rate of 8 % Only the amount of the bothe given in Question It self but there is excess payment done by Opus i.e. of $ 81,540 ($ 373502 - ($ 583,924 / 2)) then Actual Investment in BloomBond Will be $ 291,962 ($ 583,924 - $ 81,540).

Loss reported for the debt = $ 373,502 - ($ 583,924 / 2)

= $ 373,502 - $291,962

= $ 81,540.

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