On December 31, 2016, Snoopy, a subsidiary of Peanuts, issues to Linus Lending, an unaffiliated entity $2,000,000 4% five-year bonds with interest payable annually. The bonds are issued at a discount to yield 5%.

On December 31, 2018, Snoopy purchased the bonds from Linus Lending after the market rate of interest has risen to 6%.

Assume that Peanuts uses the equity method to account for its investment in Snoopy. Also, assume that both companies use the effective interest method to amortize premiums and discounts on bonds payable.

Required: (1) Record the issuance of the bonds by Snoopy on 12/31/2016. (2) Record the purchase of the bonds by Peanuts on 12/31/2018. (3) Record the consolidation entries at December 31, 2018 and December 31, 2019 related to the bonds. If any additional entry was made by the parent related to the bond repurchase in 2018 because it used the equity method, record that entry. Use the spreadsheet labeled Problem 4 to show your work and record your journal entries. Please clearly label all of your entries.