Able Company issued $1,170,000 of 8 percent first mortgage bonds on January 1, 20X1, at 104. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $780,000 of Ables bonds from the original purchaser on December 31, 20X5, for $774,000. Prime owns 70 percent of Ables voting common stock

Required:

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.

-Record the entry to eliminate the effects of the intercompany ownership in Able bonds for 20X5.

-Record the entry to eliminate the intercompany interest receivables/payables 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 -Record the entry to eliminate the effects of the intercompany ownership in Able bonds for 20X6. -Record the entry to eliminate the intercompany interest receivables/payables for 20X6.