Able Company issued $1,050,000 of 8 percent first mortgage bonds on January 1, 20X1, at 101. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $700,000 of Able's bonds from the original purchaser on December 31, 20X5, for $694,000. Prime owns 70 percent of Able's voting common stock.

a.Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X5.

b.Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X6.

Note: I have worked through some of this problem, but cannot figure out the rest. Here is what I have so far that is correct

a.

Bonds Payable 700000

Premium on Bonds Payable

Investment in Able Company Bonds 694000

Gain on Bond Retirement

Interest Payavble 28000

Interest Receivable 28000

b.

Bonds Payable 700000

Premium on Bonds Payable

Interest Income

Investment in Able Company bonds

Interest Expense

Investment in Able Company

NCI in NA of Able Company

Interest Payable 28000

Interest Recievable 28000