On December 31, Year 6 the Parent paid $509,000 to purchase all of the outstanding Subsidiary bonds (issued in Year 4, as noted above.) The bond premium is amortized using the straight line method. The bond amortization schedule for the Parent's bond investment is provided in the excel doc. The Subsidiary reported net income of $60,000 and declared dividends of $18,000. 3. Prepare the Consolidation entries for Year 6. On December 31, Year 4 the Subsidiary Company issued $500,000 face value bonds to an unaffiliated company for $480,000. The bonds pay interest annual on December 31, and the bond discount is amortized using the straight- line method. The bond amortization schedule from the initial issuance date is provided in the excel doc. The parent accounts for its Equity Investment in the subsidiary using the equity method. Unconfirmed profits are allocated pro-rata. COUPON PAYMENT INTEREST EXPENSE DISCOUNT AMORTIZATION Subsidiary PERIOD 12/31/44 12/31/45 12/31/Y6 12/31/47 12/31/48 12/31/49 40,000 40,000 40,000 40,000 40,000 200,000 36,000 36,000 36,000 36,000 36,000 180,000 4,000 4,000 4,000 4,000 4,000 20,000 Carrying value NBV 480,000 484,000 488,000 492,000 496,000 500,000 COUPON PAYMENT Interest Income PREMIUM AMORTIZATION Parent PERIOD 12/31/Y6 12/31/47 12/31/48 12/31/49 40,000 40,000 40,000 120,000 37,000 37,000 37,000 111,000 3,000 3,000 3,000 9,000 Carrying value NBV 509,000 506,000 503,000 500,000 On December 31, Year 6 the Parent paid $509,000 to purchase all of the outstanding Subsidiary bonds (issued in Year 4, as noted above.) The bond premium is amortized using the straight line method. The bond amortization schedule for the Parent's bond investment is provided in the excel doc. The Subsidiary reported net income of $60,000 and declared dividends of $18,000. 3. Prepare the Consolidation entries for Year 6. On December 31, Year 4 the Subsidiary Company issued $500,000 face value bonds to an unaffiliated company for $480,000. The bonds pay interest annual on December 31, and the bond discount is amortized using the straight- line method. The bond amortization schedule from the initial issuance date is provided in the excel doc. The parent accounts for its Equity Investment in the subsidiary using the equity method. Unconfirmed profits are allocated pro-rata. COUPON PAYMENT INTEREST EXPENSE DISCOUNT AMORTIZATION Subsidiary PERIOD 12/31/44 12/31/45 12/31/Y6 12/31/47 12/31/48 12/31/49 40,000 40,000 40,000 40,000 40,000 200,000 36,000 36,000 36,000 36,000 36,000 180,000 4,000 4,000 4,000 4,000 4,000 20,000 Carrying value NBV 480,000 484,000 488,000 492,000 496,000 500,000 COUPON PAYMENT Interest Income PREMIUM AMORTIZATION Parent PERIOD 12/31/Y6 12/31/47 12/31/48 12/31/49 40,000 40,000 40,000 120,000 37,000 37,000 37,000 111,000 3,000 3,000 3,000 9,000 Carrying value NBV 509,000 506,000 503,000 500,000
