Since its 100% acquisition of Dancer Corporation stock on December 31, 2012, Jones Corporation has maintained its investment under the equity method. However, due to Dancer's earning potential, the price included a $40,000 payment for goodwill. At the time of the purchase, the fair value of Dancer's assets equaled their book value.

On January 2, 2014, Dancer Corporation issued 10-year, 7% bonds at a face value of $50,000. The bonds pay interest each December 31. On January 2, 2016, Jones Corporation purchased all of Dancer Corporation's outstanding bonds for $48,000. The discount is amortized on a straight-line basis. They have been included in Jones'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.

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Jones Dancer Corporatio 70,500 A50,00) 200,000 AB,250 2,420,000 350,000 n Corporation Cash Accounts Receivable Inventory Investment in Bonds Plant and Equipment (net) 67,500 5,000 65,000 196,000 in Dancer Corporation. 275,000 (18,000 Accounts Payable Bonds Payable (7%) Common Stock ($10 par-Jones PaidIn Capital in Excess of Par-Jones Retained Eamings, January 1,2016 Jones Common Stock ($ 10 par Dancer. PaidIn Capital in Excess of Par Dancer Retained Eamings, January 1,2016-Dancer Sales Cost of Goods Sold Other Expenses Interest Income Interest Expense. (1,000,000 (750,000) (730,000 (100,000] 130,000] (80,000] (2,500,000] (540,000] 1,000,000 405,000 20,000 106,000 (3,750] 0) 3,500 0) 0)