Assume the same facts as in E8-14 except for the changes in the trial balances, but prepare entries using straight-line amortization of bond discount or premium.

In E8-14

Porter Company purchased 60 percent ownership of Temple Corporation on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of Temple's book value. On January 1, 20X1, Porter sold $80,000 par value, 8 percent, five-year bonds directly to Temple when the market interest rate was 7 percent. The bonds pay interest annually on December 31. Porter uses the fully adjusted equity method in accounting for its ownership of Temple. On December 31, 20X2, the trial balances of the two companies are as follows:

Required

a. Record the journal entry or entries for 20X2 on Porter’s books related to its investment in Temple.

b. Record the journal entry or entries for 20X2 on Porter’s books related to its bonds payable.
c. Record the journal entry or entries for 20X2 on Temple’s books related to its investment in Porter’s bonds.

d. Prepare the elimination entries needed to complete a consolidated worksheet for 20X2.
e. Prepare a three-part consolidated worksheet for 20X2.

Transcribed Image Text:

Porter Company Temple Corporation Item Debit Credit Debit Credit Cash& Accounts Receivable Inventory Buildings & Equipment Investment in Temple 81,480 120,000 500,000 S 38,720 65,000 300,000 101,772 Corporation Stock Investment in Porter 82,100 61,000 15,000 14,000 10,000 Company Bonds Cost of Goods Sold Depreciation Expense Interest Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Common Stock Retained Earnings Sales Interest Income 99,800 25,000 5,790 40,000 $175,000 68,800 80,000 1,200 200,000 230,068 200,000 75,000 41,200 200,000 100,000 49,830 114,000 5,790 17,874 Income from Temple Corp Total $973,842 $973,842 $585,820 $585,820