The following information related to intercompany bond holdings was taken from the adjusted trial balances of a parent company and its 90%-owned subsidiary four years before the bond issue matured:

Parent Subsidiary Investment in S bonds, $50,000 par

$49,000 Interest receivable 2,500 Interest expense

$ 9,000 10% Bonds payable, $100,000 par 100,000 Bond premium 4,000 Interest income 5,250 Interest payable 5,000 Construct the consolidation working paper entries necessary to eliminate reciprocal balances

(a) assuming that the parent acquired its intercompany bond investment at the beginning of the current year, and

(b) assuming that the parent company acquired its intercompany bond investment two years prior to the date of the adjusted trial balance.

AppendixLO1