Assume the same facts as in E8-15 except for the changes in the trial balances, but prepare entries using straight-line amortization of bond discount or premium.

In E8-15
Mega Corporation purchased 90 percent of Tarp Company's voting common shares on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 10 percent of the book value of Tarp Company. Mega also purchased $100,000 of 6 percent, five-year bonds directly from Tarp on January 1, 20X2, for $104,000. The bonds pay interest annually on December 31. The trial balances of the companies as of December 31, 20X4, are as follows:

Required
a. Record the journal entry or entries for 20X4 on Mega’s books related to its investment in Tarp Company stock.
b. Record the journal entry or entries for 20X4 on Mega’s books related to its investment in Tarp Company bonds.
c. Record the journal entry or entries for 20X4 on Tarp’s books related to its bonds payable.
d. Prepare the elimination entries needed to complete a consolidated worksheet for 20X4.
e. Prepare a three-part consolidated worksheet for20X4.

Transcribed Image Text:

Mega Corporation Credit Tarp Company Credit Cash & Receivables $ 36,600 Buildings & Equipment 240,000 $ 79,800 9 Cost of Goods Sold Dividends Declared Accumulated Depreciation $140,000 Bonds Payable 4 Retained Earnings 22,500 $962,100 $962,100 $471,600 $471,600 Mega Corporation Credit Tarp Company Credit Cash & Receivables 3 2 Buildings & Equipment xpense 5,202 Accumulated Depreciation $140,000 2 Income from Subsidiary $962,112 $962,112 $471,602 $471 71,602