9-3 Prentice Company, who owns an 80% interest in Steffey Company, purchased $2,000,000 of Steffeys 8% bonds at 106 on December 31, 2010. The bonds pay interest on January 1 and July 1 and mature on December 31, 2013. Prentice Company uses the cost method to account for its investment in Steffey. Selected balances from December 31, 2010 accounts of the two companies are as follows:

Prentice _____Steffey____

Investment in Steffey 8% bonds $2,120,000 $ ----

Bond discount ---- 300,000

Interest payable ---- 800,000

8% bonds payable ---- 20,000,000

Interest expense ---- 1,700,000

Gain or loss on constructive

retirement of bonds ---- ----

Required:

Prepare in general journal form the workpaper eliminations related to the bonds to consolidated the financial statements of Prentice and its subsidiary for the year ended December 31, 2010 and 2011.