Since its 100% acquisition of Dancer Corporation stock on December 31, 2012, Jones Corporation has maintained its investment under the equity method. However, due to Dancer's earning potential, the price included a $40,000 payment for goodwill. At the time of the purchase, the fair value of Dancer's assets equaled their book value.
On January 2, 2014, Dancer Corporation issued 10-year, 7% bonds at a face value of $50,000. The bonds pay interest each December 31. On January 2, 2016, Jones Corporation purchased all of Dancer Corporation's outstanding bonds for $48,000. The discount is amortized on a straight-line basis. They have been included in Jones's long-term investment in bonds account. Below are the trial balances of both companies on December 31, 2016.

1. Prepare the worksheet entries needed to eliminate the intercompany debt on December 31, 2016.
2. Prepare a consolidated income statement for the year ended December 31, 2016.
Note: No worksheet is required.

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Jones Corporation Dancer Corporation Cash 70,500 67,500 Accounts Receivable 450,000 75,000 65,000 Inventory 200,000 Investment in Bonds 48,250 Plant and Equipment (net) 2,420,000 196,000 Investment in Dancer Corporation 350,000 Accounts Payable (275,000) (18,000) Bonds Payable (7%) (50,000) Common Stock ($10 par)-Jones (1,000,000) Paid-In Capital in Excess of Par-Jones (750,000) Retained Earnings, January 1, 2016–Jones (730,000) Common Stock ($10 par)-Dancer (100,000) Paid-In Capital in Excess of Par-Dancer (130,000) Retained Earnings, January 1, 2016-Dancer (80,000) Sales (2,500,000) (540,000) Cost of Goods Sold 1,000,000 405,000 Other Expenses 720,000 106,000 Interest Income (3,750) Interest Expense 3,500 Totals