1) Pac Company owns a 90% interest in Sail Company. On January 1, 2010, Pac had $300,000,...
Question:
1) Pac Company owns a 90% interest in Sail Company. On January 1, 2010, Pac had $300,000, 6% bonds outstanding with an unamortized premium of $9,000. The bonds mature on December 31, 2014. Sail acquired one-third of Pac's bonds in the open market for $97,000 on January 1, 2010. Both companies use straight-line amortization of bond discounts/premiums. Interest is paid on December 31. On December 31, 2010, the books of the two affiliates held the following balances:
Pac's book s
6% bonds payable $300,000
Premium on bonds 7,200
Interest expense 16,200
Sail's books
Investment in Pac bonds $ 97,600
Interest income 6,600
Calculate the gain from the bond purchase that appeared on the December 31, 2010 consolidated income statement.
2) Plo Corporation issued six thousand, $1,000 par, 6% bonds on January 1, 2010, at par. Interest is paid on January 1 and July 1 of each year; the bonds mature on January 1, 2015. On January 2, 2012, Scar Corporation, a 75%-owned subsidiary of Plenty, purchased 3,000 of the bonds on the open market at 102.50. Plenty's separate net income for 2012 included the annual interest expense for all 3,000 bonds. Scar's separate net income for 2012 was $400,000, which included the bond interest received on July 1 as well as the accrual of bond interest revenue earned on December 31. Both companies use straight-line amortization of bond discounts/premiums.
Using the original information, calculate the amount of consolidated Interest Expense for 2012.
3) Party Corporation issued six thousand, $1,000 par, 6% bonds on January 1, 2010, at par. Interest is paid on January 1 and July 1 of each year; the bonds mature on January 1, 2015. On January 2, 2012, Stair Corporation, a 75%-owned subsidiary of Party, purchased 3,000 of the bonds on the open market at 102.50. Party separate net income for 2012 included the annual interest expense for all 3,000 bonds. Stair's separate net income for 2012 was $400,000, which included the bond interest received on July 1 as well as the accrual of bond interest revenue earned on December 31. Both companies use straight-line amortization of bond discounts/premiums.
What was the amount of gain or (loss) from the intercompany purchase of Party's bonds on January 2, 2012?
4) Pitt Company owns a 90% interest in Sipp Company. On January 1, 2010, Pitt had $300,000, 6% bonds outstanding with an unamortized premium of $9,000. The bonds mature on December 31, 2014. Sipp acquired one-third of Pitt bonds in the open market for $97,000 on January 1, 2010. Both companies use straight-line amortization of bond discounts/premiums. Interest is paid on December 31. On December 31, 2010, the books of the two affiliates held the following balances:
Pitt's book s
6% bonds payable $300,000
Premium on bonds 7,200
Interest expense 16,200
Sipp's books
Investment in Pitt bonds $ 97,600
Interest income 6,600
Calculate the Consolidated Interest Expense and consolidated Interest Income, respectively, for the consolidated income statement for the year ended December 31, 2010
5) Place Corporation issued six thousand, $1,000 par, 6% bonds on January 1, 2010, at par. Interest is paid on January 1 and July 1 of each year; the bonds mature on January 1, 2015. On January 2, 2012, Stay Corporation, a 75%-owned subsidiary of Place, purchased 3,000 of the bonds on the open market at 102.50. Place's separate net income for 2012 included the annual interest expense for all 3,000 bonds. Stay's separate net income for 2012 was $400,000, which included the bond interest received on July 1 as well as the accrual of bond interest revenue earned on December 31. Both companies use straight-line amortization of bond discounts/premiums.
Using the original information, the elimination entries on the consolidation working papers prepared on December 31, 2012 included at least ______
A) credit to Bond Interest Receivable for $180,000.
B) debit to Bond Interest Expense for $360,000.
C) credit to Bond Interest Expense for $180,000 and a debit to Bond Interest Payable for $90,000.
D) debit to Bond Interest Revenue for $360,000.
Financial Accounting Tools for Business Decision Making
ISBN: 978-0470239803
5th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso