Peerless, Inc. owns 70% of Special Foods, Inc. Both companies use the effective interest method.

Special Foods (SF), issued $1,200,000 of $1, 000 face amount, fifteen-year bonds on June 30, 2013. The bonds carried a stated rate of 7% and paid interest semiannually.

On June 30, 2015 Peerless, Inc. (P) purchased all of SF bonds on the open market for $1,025,000. Both companies have a calendar year end. The SF Bonds were sold to yield 6.5%.

COMPLETE THE FOLLOWING TABLE

What was the carrying value of SF bonds on SF books when P made the open market purchase?
How many periods were left to maturity for the SF bonds when P bought the bonds?
Present the entry for the issuance of SF bonds on June 30, 2013.
Present the entry for Peerless constructive retirement of SF bonds on June 30, 2015.
Illustrate the calculation of the gain or loss on constructive retirement by using the price paid by Peerless and the carrying value of SF bonds on the date of the constructive retirement.
Illustrate the calculation of the gain or loss on constructive retirement by using the premium and/or discount accounts of the two companies on the date of the constructive retirement.
What market rate of interest will P receive on the investment in SF bonds? (use the YIELD function)
Present the entry for the recognition of interest expense on the books of SF for the first the first period after the constructive retirement.
Present the entry for the recognition of interest income on the books of P for the first period after the constructive retirement
Present the consolidation entry for the bonds on December 31, 2016
Present the consolidation entry for the bonds on December 31, 2017