Question

Porter Company purchased 60 percent ownership of Temple Corporation on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of Temple's book value. On January 1, 20X1, Porter sold $80,000 par value, 8 percent, five-year bonds directly to Temple when the market interest rate was 7 percent. The bonds pay interest annually on December 31. Porter uses the fully adjusted equity method in accounting for its ownership of Temple. On December 31, 20X2, the trial balances of the two companies are as follows:


Required
a. Record the journal entry or entries for 20X2 on Porter’s books related to its investment in Temple.
b. Record the journal entry or entries for 20X2 on Porter’s books related to its bonds payable.
c. Record the journal entry or entries for 20X2 on Temple’s books related to its investment in Porter’s bonds.
d. Prepare the elimination entries needed to complete a consolidated worksheet for 20X2.
e. Prepare a three-part consolidated worksheet for20X2.


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  • CreatedMay 23, 2014
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