Able Company issued $720,000 of 10 percent first mortgage bonds on January 1, 20

Question

Able Company issued $720,000 of 10 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 $480,000 of Able’s bonds from the original purchaser on December 31, 20X5, for $473,000. Prime owns 60 percent of Able’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.

Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X6.

Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X6.

Explanation / Answer

If prime purchased 60 % common stock on december 2015 then

Elemination of inter company dues

1.Inter company due debit 473000

Investment in able co of marginal bonds credit 473000

2. 10% marginal bonds debit 480000

credit inter company dues with 480000

3. debit inter company dues with 7000

credit profit on cancelation with 7000

If prime purchased common stock on 2016 then those entries will appear in 2016

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.