Betty possesses a 70% interest in the outstanding stock of Kelly. On January 1, 2013, Kelly issued $1 million in 20 year bonds, paying 9% interest annually. Kelly sold the debt for $940,000 to yield an effective rate of 10% per year. On January 1, 2015, Betty purchased all of the debt on the open market for $1,057,000. This price was based on an effective rate of 8%. At January 1, 2015, the unamortized discount and book value of the debt was $50,600 and $949,400 respectively.

Required:

Prepare the December 31, 2014, consolidation entries necessitated by the retirement of the debt by Kelly and subsequent purchase of the debt by Betty. The parent uses the equity method to account for the investment.

Answer rating: 100% (QA)

Answer Breaux Entries When Breaux purchased the debt it records the ... View the full answer