Since its 100% acquisition of Dreger Corporation stock on December 31, 2012, Jayco Corporation has maintained its investment under the equity method. However, due to Dreger€™s earning potential, the price included a $40,000 payment for goodwill. At the time of the purchase, the fair value of Dreger€™s assets equaled their book value.
On January 2, 2014, Dreger Corporation issued 10-year, 7% bonds at a face value of $50,000. The bonds pay interest each December 31. On January 2, 2016, Jayco Corporation purchased all of Dreger Corporation€™s outstanding bonds for $46,000. The discount is amortized on a straight-line basis. They have been included in Jayco€™s long-term investment in bonds account. Below are the trial balances of both companies on December 31, 2016.

Required
1. Prepare the worksheet entries needed to eliminate the intercompany debt on December 31, 2016.
2. Prepare a consolidated income statement for the year ended December 31, 2016. No worksheet is required.

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Jayco orporation Corporation Dreger Cash Accounts Receivable.. Inventory Investment in Bonds Plant and Equipment (net) Investment in Dreger Corporation.. .. Accounts Payable Bonds Payable (7%) 72,500 450,000 200,000 46,500 67,500 75,000 65,000 2,420,000 96,000 350,000 1275,000 (18,000] (50,000 (1,000,000) 750,000) 730,000 Paid-In Capitol in Excess of Par-Jayco. Retained Earnings, January 1, 2016 Jayco Common Stock ($10 par-Dreger Paid-In Capital in Excess of Par-Dreger Retained Earnings, January 1,2016-Dreger Sales Cost of Goods Sold Other Expenses Interest Income. Interest Expense .. , . (100,000] (130,000 (80,000 12,500,000) 540,000] 405,000 720,000 06,000 1000,000 4,000) 3,500 Totals