On January 1, 20X1, Fern Corporation paid Morton Advertising $116,200 to acquire 70 percent of Vincent Company's

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On January 1, 20X1, Fern Corporation paid Morton Advertising $116,200 to acquire 70 percent of Vincent Company's stock. Fern also paid $45,000 to acquire $50,000 par value 8 percent, 10-year bonds directly from Vincent on that date. Interest payments are made on January 1 and July 1. The fair value of the noncontrolling interest at January 1, 20X1, was $49,800, and book value of Vincent's net assets was $110,000. The book values and fair values of Vincent's assets and liabilities were equal except for buildings and equipment, which had a fair value $56,000 greater than book value and a remaining economic life of 14 years at January 1, 20X1.

The trial balances for the two companies as of December 31, 20X3, are as follows:

On January 1, 20X1, Fern Corporation paid Morton Advertising $116,200


On July 1, 20X2, Vincent sold land that it had purchased for $17,000 to Fern for $25,000. Fern continues to hold the land at December 31, 20X3. Assume Fern Corporation uses the fully adjusted equity method.

Required
a. Record the journal entries for 20X3 on Fern's books related to its investment in Vincent's stock and bonds.
b. Record the entries for 20X3 on Vincent's books related to its bond issue.
c. Prepare elimination entries needed to complete a consolidation worksheet for 20X3.
d. Prepare a three-part consolidation worksheet for 20X3.

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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Advanced Financial Accounting

ISBN: 978-0078025624

10th edition

Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker

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