Cardinal Company is an 80% owned subsidiary of Dove Corporation. Cardinal Company issued $100,000 of 8%, 10-year bonds for $96,000 on January 1, 2011. Annual Interest is paid on January 1. Dove Corporation purchased the bonds on January 1, 2015, for $101,500. Both companies use the straight-line method to amortize the premium/discount on the bonds.

1. prepare the elimination and adjustments that would be made on the December 31, 2015, consolidated worksheet as a result of this purchase.

2. Prepare the eliminations and adjustments that would be made on December 31, 2016, consolidated worksheet.

12/31/2011 n/a 1 Interest Expense Interest Payable Discount on Bonds Payable To record interest due to investors n/a n/a 1 " 1 12/31/2012 n/a Interest Expense Interest Payable Discount on Bonds Payable To record interest due to investors n/a n/a 1 ! 1 1 1 12/31/2013 n/a Interest Expense Interest Payable Discount on Bonds Payable To record interest due to investors n/a n/a 12/31/2014 n/a Interest Expense Interest Payable Discount on Bonds Payable To record interest due to investors n/a n/a 12/31/2015 n/a n/a Interest Expense Interest Payable Discount on Bonds Payable To record interest due to investors n/a ----- This is where things get slightly tricky. On 1/1/2015, the parent purchases all of the outstanding of the year. Until then, all we can do is record the investment they have made in S's Bonds. 1/1/2015 n/a - Investment in Bonds Cash P purchases all of S' Bonds n/a - 1 - I Record the interest due to P. As of the last date of the year, P is owed some interest for the yea "Investment in S" is increased by the amortization amount i.e. $1,500 / # of remaining years of b contracted rate. 12/31/2015 n/a Interest Receivable Investment in Bonds Interest Revenue n/a n/a Elimination Entries: Now that all items have been recorded for 2015, it's time to eliminate them. Why? Because, w saying that "my left pocket owes my right pocket some money." Doesn't make a lot of sense. S 12/31/2015 1 1 1 Interest Payable n/a Interest Receivable To eliminate the contracted receivables and payables, if necessary. n/a - 1 1 Now, start by eliminating the beginning of the year's balances in the related bond payable and it Intrestingly, you will notice that there are two accounts that are being debited and credited simi lines). (Step 1) Interest Revenue n/a Discount on Bonds Payable n/a Bonds Payable n/a Loss on retirement (Leave alone till Step 2) Investment in Bonds n/a Interest Expense n/a Investment in Bonds n/a Discount on Bonds Payable n/a To eliminate the nominal or contracted interest income and interest expense from the moment P purchased S or 1/2/20X6 Two blue lines: These accounts are being debited and credited in the same entry. Thus, we will credit and vice-versa. Re-enter the previous entry without the duplicate accounts and find the p (Step 2) Interest Revenue n/a Bonds Payable n/a Loss on retirement of Bonds n/a Interest Expense n/a Investment in Bonds n/a Discount on Bonds Payable n/a To eliminate the nominal or contracted interest income and interest expense from the moment P purchased S or 1/2/20X6