Problem $7-7$

L$05,7$

Chase Corporation owns $60$ percent of Moncton Corporation's voting shares. On January $1,$ Year $2,$ Chase Corporation sold

$$300,000$ par value, $6$ percent first mortgage bonds to Moncton for $$312,000.$ The bonds mature in $10$ years and pay interest annually

on January $1.$ The straight$-$line method is used when amortizing the premium on the bonds.

Required

$($a$)$ Prepare the journal entries for Year $2$ for Moncton related to its ownership of Chase's bonds.

$($b$)$ Prepare the journal entries for Year $2$ for Chase related to the bonds.

$($c$)$ What amounts should be reported on the Year $2$ consolidated statements with respect to these bonds?