Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please don't copy the answers from another existing question. Problem 6-28 (Algo) (LO 6-3) Cairns owns 70 percent of the voting stock of Hamilton, Inc.

Please don't copy the answers from another existing question.

Problem 6-28 (Algo) (LO 6-3)

Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parents interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton.

On January 1, 2017, Hamilton sold $1,300,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 8 percent payable every December 31. Cairns acquired 40 percent of these bonds at 96 percent of face value on January 1, 2019. Both companies utilize the straight-line method of amortization.

Prepare the consolidation worksheet entries to recognize the effects of the intra-entity bonds at each of the following dates. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

  1. December 31, 2019

  2. December 31, 2020

  3. December 31, 2021

image text in transcribed

ANSWEI is compiece but not Cucinely correct. No Date Accounts Debit Credit 1 December 31, 201 Bonds payable Premium on bonds payable 520,000 42,536 X 18,200 x Interest income Investment in bonds Interest expense 44,200 37,336 501,800 Gain on retirement of bonds 2 December 31, 202 Bonds payable Premium on bonds payable 520,000 42,536 18,200 X Interest income OOOOOO Investment in bonds 39,000 X Interest expense 37,336 504,400 X Investment in Hamilton 3 December 31, 202 Bonds payable Premium on bonds payable 520,000 42,536 X Interest income 15,600 X Investment in bonds Interest expense 33,800 37,336 507,000 Investment in Hamilton

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Foreign Corrupt Practices Act Compliance Guidebook Protecting Your Organization From Bribery And Corruption

Authors: Martin T. Biegelman, Daniel R. Biegelman

1st Edition

0470527935, 978-0470527931

More Books

Students also viewed these Accounting questions