Gain/Loss Calculation; Bond Consolidation Entries at Year-End Poll Inc. owns 100% of the out¬

standing common stock of Soli Inc. On 1/1/05, Poll acquired in the open market 30% of Soli’s out¬

standing 10% bonds at a cost of $340,000. On 1/1/05, the carrying value of all of the bonds

($1,000,000 face amount) was $1,035,000. Their maturity date is 12/31/09. Each entity uses straight-line amortization.

1. What is the gain or loss on debt extinguishment to be reported in consolidation for 2005?

2. Prepare the bond-related consolidation entries at 12/31/05. (For Module 1 only: First prepare the appropriate general ledger adjusting entries at 12/31/05.)

Problems