• On July 1, 2017 Plaeton Ltd issued a $3,500,000, 10-year bond paying interest of 9% annually for $3,284,946 with an effective interest rate of 10%.
• Braxford Ltd owns 90% of Paeton Ltd. On July 1, 2020 Braxford bought 100% of the bonds from a third party for $3,701,131 with an effective yield of 8%.
• On July 1, 2018 Plaeton Ltd purchased equipment for $5,000,000 and leased the equipment to Braxford Ltd for 20 years which was the expected useful life of the equipment.
• The rate of return is 6% and the lease payment is $435,923 per year, payable at the end of each calendar year.

1. Calculate the gain/loss on retirement of the bond as at July 1, 2020.
2. Prepare the elimination consolidation entries for the year ended June 30, 2021 for both the bond and the lease.

Answer rating: 100% (QA)

1The gainloss on retirement of the bond as at July 1 2020 would be 416185 370113132849464... View the full answer