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, 2014, Hamilton sold $1,800,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 9 percent payable every December 31. Cairns acquired 35 percent of these bonds at 96 percent of face value on January 1, 2016. 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.)

December 31, 2016

December 31, 2017

December 31, 2018

No Date Accounts December 31, 2016 Bonds payable Premium on bonds payable Interest income Gain on retirement of bonds Interest expense Investment in bonds 2 December 31, 2017 Bonds payable Interest income Premium on bonds payable Investment in Hamilton Interest expense Investment in bonds 3 December 31, 2018 Bonds payable Interest income Premium on bonds payable Investment in Hamilton Interest expense Investment in bonds