Nettle Corporation sold $140,000 par value, 10-year first mortgage bonds to Timberline Corporation on January 1, 20X5. The bonds, which bear a nominal interest rate of 12 percent, pay interest semiannually on January 1 and July 1. The entry to record interest income by Timberline Corporation on December 31, 20X7, was as follows:

Note: Assume using straight-line amortization of bond discount or premium.

General Journal	Debit	Credit
Interest Receivable	8,400
Interest Income		7,980
Investment in Nettle Corporation Bonds		420

Timberline Corporation owns 65 percent of the voting stock of Nettle Corporation, and consolidated statements are prepared on December 31, 20X7.

Required:

a.	What was the original purchase price of the bonds to Timberline Corporation?

b.	What is the balance in Timberlines bond investment account on December 31, 20X7?

c.

Prepare the worksheet elimination entry or entries needed to remove the effects of the intercompany ownership of bonds in preparing consolidated financial statements for 20X7. Record the entry to eliminate the effects of the intercompany ownership in the bonds. Record the entry to eliminate the intercompany interest receivables/payables.