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 $1,300,000 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 40 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.

Consolidating Entries	Debit	Credit
Bonds payable
Interest income
Premium on bonds
Gain on retirement of bonds
interest expense
Investment in bonds

Consolidating Entries	Debit	Credit
Bonds payable
Interest income
Premium on bonds payable
Interest expense
Investment in bonds
Investment in Hamilton

Consolidating Entries	Debit	Credit
Bonds payable
Interest income
Premium on bonds payable
Interest expense
Investment in bonds
Investment in Hamilton