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On January 1, 2011. Peoples, Inc. acquired an 80% interest in Schmidt Corporation. Peoples also purchased 30% of the $500,000 par value outstanding bonds of
On January 1, 2011. Peoples, Inc. acquired an 80% interest in Schmidt Corporation. Peoples also purchased 30% of the $500,000 par value outstanding bonds of Schmidt Corporation for $140,000 on January 2. 2011. The bonds mature in 10 years, carry an 11% annual interest rate payable on December 31, and had a carrying value of $505,000 on the date of purchase. Both companies use the straight-line method to amortize bonds discounts and premiums. Required: Compute the following items at December 31, 2011: Carrying value of the debt. Interest revenue reported by Peoples, Inc. Interest expense reported by Schmidt Corporation Balance in the Investment in Schmidt Bonds account Record the elimination entries for the consolidation working papers at December 31, 2011
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