Pap Corporation acquired an 80 percent interest in Son Corporation at book value equal to fair value

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Pap Corporation acquired an 80 percent interest in Son Corporation at book value equal to fair value on January 1, 2012, at which time Son's capital stock and retained earnings were $200,000 and $80,000, respectively. On January 2, 2013, Son purchased $100,000 par of Pap's 8 percent, $200,000 par bonds for $97,600 three years before maturity. Interest payment dates are January 1 and July 1. During 2013, Son reports interest income of $8,800 from the bonds, and Pap reports interest expense of $16,000.
ADDITIONAL INFORMATION
1. Pap's separate income for 2013 is $400,000.
2. Son's net income for 2013 is $100,000.
3. Pap accounts for its investment using the equity method.
4. Straight-line amortization is applicable.
REQUIRED
1. Determine the gain or loss on the bonds.
2. Prepare the journal entries for Son to account for its bond investment during 2013.
3. Prepare the journal entries for Pap to account for its bonds payable during 2013.
4. Prepare the journal entry for Pap to account for its 80 percent investment in Son for 2013.
5. Calculate noncontrolling interest share and consolidated net income for 2013.
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Advanced Accounting

ISBN: 978-0133451863

12th edition

Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith

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