Several years ago Absalom, Inc., sold $800,000 in bonds to the public. Annual cash interest of 8

Question:

Several years ago Absalom, Inc., sold $800,000 in bonds to the public. Annual cash interest of 8 percent ($64,000) was to be paid on this debt. The bonds were issued at a discount to yield 10 percent. At the beginning of 2010, McDowell (a wholly owned subsidiary of Absalom) purchased $100,000 of these bonds on the open market for $121,655, a price based on an effective interest rate of 6 percent. The bond liability had a book value on that date of $668,778. What consolidation entry would be required for these bonds on
a. December 31, 2010?
b. December 31, 2012?

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...