Farmer Corporation owned 65% of the voting common stock of Suffield, Inc. The parent's interest was...

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Farmer Corporation owned 65% of the voting common stock of Suffield, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price. On January 1, 2017, Suffield sold $1,500,000 in ten-year bonds to the public at 110. The bonds pay a 10% interest rate every December 31. Famer acquired 50% of these bonds on January 1, 2019, for 94% of the face value. Both companies utilized the straight-line method of amortization. 1. What balances would need to be considered in order to prepare the consolidation entry in connection with these intra-entity bonds at December 31, 2019, the end of the first year of the intra-entity investment? Prepare schedules to show numerical answers for balances that would be needed for the entry. 2. How much is the gain/loss from intra-entity bond transfer on 1/1/2019? 3. What consolidation entry would be recorded in connection with these intra-entity bonds on December 31, 2019? 4. What consolidation entry would be recorded in connection with these intra-entity bonds on December 31, 2020? Farmer Corporation owned 65% of the voting common stock of Suffield, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price. On January 1, 2017, Suffield sold $1,500,000 in ten-year bonds to the public at 110. The bonds pay a 10% interest rate every December 31. Famer acquired 50% of these bonds on January 1, 2019, for 94% of the face value. Both companies utilized the straight-line method of amortization. 1. What balances would need to be considered in order to prepare the consolidation entry in connection with these intra-entity bonds at December 31, 2019, the end of the first year of the intra-entity investment? Prepare schedules to show numerical answers for balances that would be needed for the entry. 2. How much is the gain/loss from intra-entity bond transfer on 1/1/2019? 3. What consolidation entry would be recorded in connection with these intra-entity bonds on December 31, 2019? 4. What consolidation entry would be recorded in connection with these intra-entity bonds on December 31, 2020?

Answer rating: 100% (QA)

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