Mega Corporation purchased 90 percent of Tarp Company’s voting common shares on

Question

Mega Corporation purchased 90 percent of Tarp Company’s voting common shares on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 10 percent of the book value of Tarp Company. Mega also purchased $91,000 of 6 percent, five-year bonds directly from Tarp on January 1, 20X2, for $95,000. The bonds pay interest annually on December 31. The trial balances of the companies as of December 31, 20X4, are as follows:

Prepare the journal entry or entries for 20X4 on Mega’s books related to its investment in Tarp Company stock. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

        

Prepare the journal entry or entries for 20X4 on Mega’s books related to its investment in Tarp Company bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

        

Prepare the journal entry or entries for 20X4 on Tarp’s books related to its bonds payable. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

        

Prepare the consolidation entries needed to complete a consolidated worksheet for 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

        

Prepare a three-part consolidated worksheet for 20X4. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

I've posted this question before and it was answered wrong. The only thing that was right was the first entry for B was debit 5460 not sure what account was debited. the only other thing that was right was the bond premium in C and it was a debit for 800. Everything else was wrong.

Mega Corporation purchased 90 percent of Tarp Company’s voting common shares on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 10 percent of the book value of Tarp Company. Mega also purchased $91,000 of 6 percent, five-year bonds directly from Tarp on January 1, 20X2, for $95,000. The bonds pay interest annually on December 31. The trial balances of the companies as of December 31, 20X4, are as follows:

Explanation / Answer

accrued dividend income a/c

to dividend income

( being dividend accrued )

* 19000*90%=17100

17100

accrued interest on bonds a/c

to interest income

( being interest accrued on bonds)

*91000*6%=5460

less: already due in books:4660

balance:5460-4660=$800

800

bonds premium a/c

to retained earnings

( being premium written off)

* premium = 4000/5 =800 for thee year.

800

800

retained earnings a/c

to minority interest/ non controlling interest

to consolidated p/l

(being retained earnings distributed)

3900

35100

dividend payable a/c

to minority interest/ non - controlling interest

( being dividend distributed to non controlling interest)

1900

SERIAL NO. PARTICULARS DEBIT$ CREDIT$ 1

accrued dividend income a/c

to dividend income

( being dividend accrued )

* 19000*90%=17100

17100

17100

2

accrued interest on bonds a/c

to interest income

( being interest accrued on bonds)

*91000*6%=5460

less: already due in books:4660

balance:5460-4660=$800

800

800

3

bonds premium a/c

to retained earnings

( being premium written off)

* premium = 4000/5 =800 for thee year.

800

800

4

retained earnings a/c

to minority interest/ non controlling interest

to consolidated p/l

(being retained earnings distributed)

39000

3900

35100

5

dividend payable a/c

to minority interest/ non - controlling interest

( being dividend distributed to non controlling interest)

1900

1900

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