Able Company issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The

Question:

Able Company issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime purchased $400,000 of Able's bonds from the original purchaser on January 1, 20X5, for $396,800. Prime owns 60 percent of Able's voting common stock.

Required
a. Prepare the worksheet elimination entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated for 20X5.
b. Prepare the worksheet elimination entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated for 20X6.

Financial Statements
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