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(20 pnts ) Fargus Corporation owned 6 1% of the voting common stock of Sanatee , Inc. The parent's interest was acquired several years ago

(20 pnts) Fargus Corporation owned 61% of the voting common stock of Sanatee, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price. On January 1, 2010, Sanatee sold $1,800,000 in ten-year bonds to the public at 108. The bonds pay a 10% interest rate every December 31. Fargus acquired 40% of these bonds on April 1, 2012, for 95% of the face value. Both companies utilized the straight-line method of amortization.

(1800000 x 108%)

1944000

Less: Premium amortization for

2 years ($144000/10years x 2years)

($28800)

Book value of Bonds payable on Jan 1, 2012

1915200

40% of Book Value on Jan 1, 2012

766080

40% of face value of bonds ($1800000 x 40%)

720,000

Book value of Bonds for Fargus ($72000 x 95%)

684000

Discount on Bonds

36000

Amortization of Bond Discount ($36000/8 years)

4500

Interest on Bond = $720000 x 10% = $72000

a. Prepare amortization tables for Fargus (4/1/2012 to 12/31/2013) and Sanatee (1/1/2010 to 12/31/2013)

Amortization table for Fargus (4/1/2012 to 12/31/2013)

Date

Interest

Discount amortized

Cash Received

Bond Balance

4/1/2012

684000

12/31/2012

72000

4500

67500

688500

12/31/2013

72000

4500

67500

693000

Amortization table for Sanatee (1/1/2010 to 12/31/2013)

Date

Interest exp.

Premium amortization

Cash Paid

Balance in Bonds Premium

Balance in Bonds Payable

Book value of Bonds

1/1/2010

144000

1800000

1944000

12/31/2010

$180,000

14400

165600

129600

1800000

1929600

12/31/2011

$180,000

14400

165600

115200

1800000

1915200

12/31/2012

$180,000

14400

165600

100800

1800000

1900800

12/31/2013

$180,000

14400

165600

86400

1800000

1886400

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