on January 1,2007 Gild Company acquired 60 percent of the outstanding common stock of Leeds company at the book value of the shares acquired. On that date the fair value of noncontrolling interest was equal to percent of book value of Leeds. At that time of purchase Leeds had common stock of $1,000,000 outstanding and retained earnings of $800,000.

On january 1,2008 Gild purchased 3/4 of Leeds bonds outstanding. This debt was originally issued on January 1,2004 at 103. The total bonds issue has a face value of $600,000 pays 10percent interest semiannually and has a 10 year maturity. Any premium or discount is amortized using the effective interest method. Gild paid $441,000 for its 3/4 investment in Leeds bonds and intends to hold the bonds until maturity.

Assume Gild accounts for its investment in Leeds stock using the fully adjusted equity method.

1. Compute the gain from the purchase of Leeds debt

2. Present the worksheet elimination entries necessary to eliminate intercompany debt and intercompany receivables/payables for 2008.

3. Present the worksheet elimination entries pessary to eliminate intercompany debt and intercompany receivables/payables for 2009.