Problem #1 all you need to do on this problem is to make the journal entries that you would make on the worksheet

The Parent purchased 80% of the Sub on January 1, 2010. On January 1, 2011, the Sub issued $1,000,000 of 10-year Bonds Payable with a stated rate of 7% when the market was 6%. The bonds pay interest annually every January 1^st.

On January 1, 2013, the Parent purchased all of the bonds at a time when the market rate was 5%, thus the price paid for the Bonds was $1,129,265. Below are the amortization tables for both companies using the effective interest rate method. (In the chart I show the interest being paid on December 31^st, the interest is actually paid every January 1^st)

Original Bonds issued by Subsidiary

Date Carrying Value Cash Paid Expense Amortized Premium Balance Carrying Value

1/1/11 $1,073,601

12/31/11 $ 70,000 $64,416 $5584 $68,021 $1,068,017

12/31/12 $ 70,000 $64,081 $5919 $62,102 $1,062,102

12/31/13 $ 70,000 $63,726 $6274 $55,828 $1,055,828

12/31/14 $ 70,000 $63,349 $6650 $49,177 $1,049,177

12/31/15 $ 70,000 $62,951 $7049 $42,128 $1,042,128

12/31/16 $ 70,000 $62,528 $7472 $34,656 $1,034,656

12/31/17 $ 70,000 $62,079 $7921 $26,735 $1,026,735

12/31/18 $ 70,000 $61,604 $8396 $18,339 $1,018,339

12/31/19 $ 70,000 $61,100 $8900 $ 9,439 $1,009,439

12/31/20 $ 70,000 $60,561 $9,439 $-0- $1,000,000

Bonds purchased by Parent

Date Carrying Value Cash Received Int Revenue Amortized Carrying Value of Bonds

1/1/13 $1,129,265

12/31/13 $ 70,000 $ 56,463 $ 13,537 $1,115,728

12/31/14 $ 70,000 $ 55,786 $ 14,214 $1,101,514

12/31/15 $ 70,000 $ 55,076 $ 14,924 $1,086,590

12/31/16 $ 70,000 $ 54,329 $ 15,671 $1,070,919

12/31/17 $ 70,000 $ 53,546 $ 16,454 $1,054,465

12/31/18 $ 70,000 $ 52,723 $ 17,277 $1,037,188

12/31/19 $ 70,000 $ 51,859 $ 18,141 $1,019,047

12/31/20 $ 70,000 $ 50,953 $ 19,047 $1,000,000

Required: (you may find it helpful to create your own elimination column worksheet and list the all of the accounts associated with bonds and then eliminate)