P814 Consolidation Worksheet with Sale of Bonds to Subsidiary (Effective Interest Method) LO 8-2 @ Porter Company purchased 60 percent ownership of Service Corporation on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of Service's book value. On January 1, 20X1, Porter sold $80,000 par value, 8 percent, five-year bonds directly to Service when the market interest rate was 7 percent. The bonds pay interest annually on December 31. Porter uses the fully adjusted equity method in accounting for its ownership of Service. On December 31, 20X2, the trial balances of the two companies are as follows: Porter Company Debit Credit $ 81,480 120,000 500,000 Service Corporation Debit Credit $ 38,720 65,000 300,000 101,772 Item Cash & Accounts Receivable Inventory Buildings & Equipment Investment in Service Corporation Stock Investment in Porter Company Bonds Cost of Goods Sold Depreciation Expense Interest Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Common Stock Retained Earnings Sales Interest Income Income from Service Corp. Total 99,800 25,000 5,790 40,000 82,100 61,000 15,000 14,000 10,000 $ 75,000 41,200 200,000 $175,000 68,800 80,000 2.100 200,000 230,068 200,000 100,000 49,830 114,000 5,790 17,874 $973,842 $973,842 $585,820 $585,820 Required a. Record the journal entry or entries for 20X2 on Porter's books related to its investment in Service. b. Record the journal entry or entries for 20X2 on Porter's books related to its bonds payable. c. Record the journal entry or entries for 20X2 on Service's books related to its investment in Porter's bonds. d. Prepare the consolidation entries needed to complete a consolidated worksheet for 20X2. e. Prepare a three-part consolidated worksheet for 20X2. P814 Consolidation Worksheet with Sale of Bonds to Subsidiary (Effective Interest Method) LO 8-2 @ Porter Company purchased 60 percent ownership of Service Corporation on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of Service's book value. On January 1, 20X1, Porter sold $80,000 par value, 8 percent, five-year bonds directly to Service when the market interest rate was 7 percent. The bonds pay interest annually on December 31. Porter uses the fully adjusted equity method in accounting for its ownership of Service. On December 31, 20X2, the trial balances of the two companies are as follows: Porter Company Debit Credit $ 81,480 120,000 500,000 Service Corporation Debit Credit $ 38,720 65,000 300,000 101,772 Item Cash & Accounts Receivable Inventory Buildings & Equipment Investment in Service Corporation Stock Investment in Porter Company Bonds Cost of Goods Sold Depreciation Expense Interest Expense Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Common Stock Retained Earnings Sales Interest Income Income from Service Corp. Total 99,800 25,000 5,790 40,000 82,100 61,000 15,000 14,000 10,000 $ 75,000 41,200 200,000 $175,000 68,800 80,000 2.100 200,000 230,068 200,000 100,000 49,830 114,000 5,790 17,874 $973,842 $973,842 $585,820 $585,820 Required a. Record the journal entry or entries for 20X2 on Porter's books related to its investment in Service. b. Record the journal entry or entries for 20X2 on Porter's books related to its bonds payable. c. Record the journal entry or entries for 20X2 on Service's books related to its investment in Porter's bonds. d. Prepare the consolidation entries needed to complete a consolidated worksheet for 20X2. e. Prepare a three-part consolidated worksheet for 20X2
