E81A Bond Sale from Parent to Subsidiary (Straight-Line Method)

LO 82

Assume the same facts as in E8-1 and prepare entries using straight-line amortization of bond discount or premium.

Pretzel Corporation owns 60 percent of Stick Corporations voting shares. On January 1, 20X2, Pretzel Corporation sold $150,000 par value, 6 percent first mortgage bonds to Stick for $156,000. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1.

Required

1. Prepare the journal entries for 20X2 for Stick related to its ownership of Pretzels bonds.

2. Prepare the journal entries for 20X2 for Pretzel related to the bonds.

3. Prepare the worksheet consolidation entries needed on December 31, 20X2, to remove the effects of the intercorporate ownership of bonds.

prepare entries using straight-line amortization of bond discount or premium.