Sibling Company issued $510,000 par value, 10-year bonds at 103 on January 1, 20X3, which Mega Corporation purchased. The coupon rate on the bonds is 11 percent. Interest payments are made semiannually on July 1 and January 1. On July 1, 20X6, Parent Company purchased $204,000 par value of the bonds from Mega for $196,200. Parent owns 75 percent of Sibling’s voting shares.

Required:
a. What amount of gain or loss will be reported in Sibling’s 20X6 income statement on the retirement of bonds? (Leave no cells blank - be certain to enter "0" wherever required.)

b. Will a gain or loss be reported in the 20X6 consolidated financial statements for Parent for the constructive retirement of bonds? What amount will be reported? (Do not round your intermediate calculations. Round your final answer to the nearest whole dollar. Leave no cells blank - be certain to enter "0" wherever required.)

c. How much will Parent’s purchase of the bonds change consolidated net income for 20X6? (Do not round your intermediate calculations. Round your final answer to the nearest whole dollar. Leave no cells blank - be certain to enter "0" wherever required.)

d. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements on December 31, 20X6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to the nearest whole dollar.)

e. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements on December 31, 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to the nearest whole dollar.)

f. If Sibling reports net income of $51,000 for 20X7, what amount of income will be assigned to the noncontrolling interest in the consolidated income statement? (Do not round your intermediate calculations. Round your final answer to the nearest whole dollar. Leave no cells blank - be certain to enter "0" wherever required.)

Answer rating: 100% (QA)

a What amount of gain or loss will be reported in Siblings 20X6 income statement on the retirement of bonds Leave no cells blank be certain to enter 0 wherever required Gain on retirement of bonds Par ... View the full answer