Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent\'s inter
ID: 2588551 • Letter: C
Question
Cairns owns 70 percent of the voting stock of Hamilton, 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. Cairns uses the equity method in its internal records to account for its investment in Hamilton On January 1, 2014, Hamilton sold $1,600,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 9 percent payable every December 31. Cairns acquired 40 percent of these bonds at 96 percent of face value on January 1, 2016. Both companies utilize the straight-line method of amortization. Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. December 31, 2016 b. December 31, 2017 c. December 31, 2018Explanation / Answer
Dec 31,2016 Bonds Payable 640000
Premium on bond payable 25600
Interest Income 59600
To Investment inBonds 616000
To Interest Expenses 25600
To Interest Income 59600
31 Dec 2017 Bonds Payable 640000
Premium on bonds payable 23600
Interest Income 59600
To Investments in bonds 616400
To Interest Expense 55600
To Investment in Hamilton 51200
31 Dec 2018 Bonds Payable 640000
Premium on bonds payable 21600
Interest Income 59600
To Investment in bonds 618400
To Interest Expense 55600
To Investment in Hamilton 47200