Question

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 TarpCommon 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.


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  • CreatedMay 23, 2014
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