Bundle Company issued $500,000 par value, 10 year bonds at 104 on January 1, 20X3, which Mega Corporation purchased The coupon rate on the bonds is 11 percent Interest payments are made semiannually on July 1 and January 1 On July 1, 20X6, Parent Company purchased $200,000 par value of the bonds fr...

a No gain or loss will be reported by Bundle b A gain of 13856 will be reported Book value of liabil ...

Bundle Company issued $500,000 par value, 10-year bonds at 104 on January 1, 20X3, which Mega Corporation

Question:

Bundle Company issued $500,000 10-year bonds at 104 on January 1, 20X3, which Mega purchased. The rate on the bonds is 11 percent. Interest payments are made semiannually on July 1 and January 1. On July 1, 20X6, Parent Company purchased $200,000 of the bonds from Mega for $192,200. Parent owns 70 percent of Bundle's voting shares.

Required
a. What amount of gain or loss will be reported in Bundle's 20X6 income statement on the retirement of bonds?
b. Will a gain or loss be reported in the 20X6 consolidated for Parent for the constructive retirement of bonds? What amount will be reported?
c. How much will Parent's purchase of the bonds change consolidated net income for 20X6?
d. Prepare the worksheet elimination entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated at December 31, 20X6.
e. Prepare the worksheet elimination entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated at December 31, 20X7.
f. If Bundle reports net income of $50,000 for 20X7, what amount of income will be assigned to the noncontrolling interest in the ?

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