Partial adjusted trial balances for Pam Corporation and its 90 percent-owned subsidiary, Sun Corporation, for the year ended December 31, 2016, are as follows:

Sun Corporation acquired $100,000 par of Pam's bonds on April 2, 2016, for $107,200. The bonds pay interest on April 1 and October 1 and mature on April 1, 2019.
REQUIRED
1. Compute the gain or loss on the bonds that will appear in the 2016 consolidated income statement.
2. Determine the amounts of interest income and expense that will appear in the 2016 consolidated income statement.
3. Determine the amounts of interest receivable and payable that will appear in the December 31, 2016, consolidated balance sheet.
4. Prepare in general journal form the consolidation workpaper entries needed to eliminate the effects of the intercompany bonds for 2016.

Transcribed Image Text:

Pam Corporation Debit (Credit) Sun Corporation Debit (Credit) Interest receivable Investment in Pam bonds Interest payable 8% bonds payable, due April 1, 2019 Interest income Interest expense $ 2,000 105,400 (4,000) (196,400) (4,200) 17,600