Question

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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  • CreatedApril 13, 2015
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