Cairns owns 80 percent of the voting stock of Hamilton, Inc. The parents 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. Cairns uses the equity method in its internal records to account for its investment in Hamilton.

On January 1, 2011, Hamilton sold $1,500,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 8 percent payable every December 31. Cairns acquired 45 percent of these bonds at 96 percent of face value on January 1, 2013. Both companies utilize the straight-line method of amortization.

Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

(1) Prepare entry B December 31, 2013 (entry titles are correct)

Bonds Payable

Interest Income

Premium on Bonds Payable

Investment in Bonds

Gain on Retirement of Bonds

Interest Expense

(2) Prepare entry *B December 31, 2014 (entry titles are correct)

Bonds Payable

Interest Income

Premium on Bonds Payable

Investment in Hamilton

Investment in Bonds

Interest Expense

(3) Prepare entry *B December 31, 2015 (entry titles are correct)

Bonds Payable

Interest Income

Premium on Bonds Payable

Investment in Hamilton

Investment in bonds

Interest Expense