P owns 80 percent of S shares since the beginning of 2016. In early 2020, the two
Question:
P owns 80 percent of S shares since the beginning of 2016. In early 2020, the two companies bought bonds issued by each other's affiliation companies. P buys 50% of OSX2016 bonds issued by S. S buys 50% of OPX2015 bonds issued by P. The relevant data for both bonds are as follows:
OPX2015 Bonds | OSX2016 Bonds | |
Bond issuers | P | S |
Bond issue date | January 1, 2015 | January 1, 2016 |
Bond maturity date | January 1, 2025 | January 1, 2024 |
Nominal value | 5.000.000 | 4.000.000 |
Discount balance on bonds payable (1/1/2019) | 300.000 | 2000 |
Bond discount amortization method | Straight Line | Straight Line |
Interest rates | 12% | 12% |
Interest payment date | January 1, July 1 | January 1, July 1 |
Date of bond purchase by P/S | January 1 , 2020 | January 1 , 2020 |
Nominal bonds purchased S | 2.500.000 | |
Nominal bonds purchased by P | 2.000.000 | |
The purchase price paid by S | 2.750.000 | |
The purchase price paid by P | 2.300.000 |
Note:
Support your answers with adequate calculations and explanations.
- Question:
1. Make a journal during 2020 for P in posting investment in bonds transactions related to OSX2016 bonds he bought. Also, make a journal during 2020 for S in posting payable bonds transactions related to OSX2016 bonds issued.
2. Make a journal by P in 2020 in the application of special equity methods related to transactions between companies OSX2016 Bonds.
3. Create an elimination journal in the working paper for the preparation of special consolidated financial statements related to transactions between OSX2016 Bonds.
Advanced Accounting
ISBN: 9780132568968
11th Edition
Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith