Bond-Related Consolidation Entries The partially completed income statements of Place Inc. and its 100%-owned created subsidiary, Show Inc., for the year ended 12/31/06 are as follows:

2006 Place Inc. Show Inc.

Sales Interest Cost Expenses of

.

sates expense

(noninterest)

.

.

.

Gain on debt extinguishment .

Intercompany Accounts Equity Dividend in income net income

(from

(of Show)

Show)

.

.

Intercompany Intercompany interest interest income expense

.

.

Net Income .

$ 7,000,000

(4,000,000)

(1,500,000)

-0-

$ 3,000,000 (1,600,000)

(1,000,000)

$ $

Additional information 1. On 1/1/06, Place acquired 40% of Show’s outstanding 10% bonds ($1,000,000 face amount)

at 90. Show had initially issued these 10-year bonds on 1/1/04 at 105.

2. Neither entity had any other investments or indebtedness that would give rise to interest income or interest expense.

3. Each entity uses straight-line amortization.

4. Show declared cash dividends of $200,000 in 2006.

1. Fill in the blanks in the preceding income statements.

2. Prepare the bond-related consolidation entries at 12/31/06.