Top Company owns a majority voting interest in Bottom, Inc. On January 1, 2012,
ID: 2714124 • Letter: T
Question
Top Company owns a majority voting interest in Bottom, Inc. On January 1, 2012, Top issued $1,000,000 of 11 percent 10-year bonds at $943,497.77 to yield 12 percent. On January 1, 2014, Bottom purchased all of these bonds in the open market at a price of $904,024.59 with an effective yield of 13 percent.
REQUIRED:
Prepare the consolidated worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates.
1. December 31, 2014
2. December 31, 2016
3. December 31, 2021
Explanation / Answer
Answer
Working
Date Account Title & Explaination Debit Credit December 31 ,2014 Bonds Payable 1,000,000.00 Interest Income 121,996.93 Discount on Bonds Payable 39,551.57 Investment in Bond 916,021.52 Interest Expenses 115,650.22 Gain on Retirement of Bond 50,773.62 December 31 ,2016 Bonds Payable 1,000,000.00 Interest Income 121,996.93 Discount on Bonds Payable 28,251.13 Investment in Bond 940,015.38 Interest Expenses 115,650.22 Investment in Bottom Inc 38,080.20 December 31 ,2021 Bonds Payable 1,000,000.00 Interest Income 121,996.93 Investment in Bond 1,000,000.00 Interest Expenses 115,650.22 Investment in Bottom Inc 6,346.71