Several years ago Brant, Inc., sold $900,000 in bonds to the public. Annual cash interest of 8 percent ($72,000) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2016, Zack Corporation (a wholly owned subsidiary of Brant) purchased $180,000 of these bonds on the open market for $201,000, a price based on an effective interest rate of 6 percent. The bond liability had a carrying amount on that date of $780,000. Assume Brant uses the equity method to account internally for its investment in Zack.

a. & b. What consolidation entry would be required for these bonds on December 31, 2016 and December 31, 2018?

1a Prepare Entry B to eliminate the intra-entity debt holdings and to recognize the loss on retirement.

1b Prepare Entry *B to eliminate the intra-entity bond holdings and to adjust the investment in Zack for the unrecognized loss on retirement.