Question
Wood Corporation owns 70 percent of Carter Companys voting shares. On January 1, 20X3, Carter sold bonds with a par value of $720,000 at 98.
Wood Corporation owns 70 percent of Carter Companys voting shares. On January 1, 20X3, Carter sold bonds with a par value of $720,000 at 98. Wood purchased $480,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in five years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1. |
Required: |
a. | What amount of interest expense should be reported in the 20X4 consolidated income statement? (Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) |
b. | Prepare the journal entries Wood recorded during 20X4 with regard to its investment in Carter bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your market rate of interest to 3 decimals. For example, .0547523 should be rounded to 5.475%)
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