The following information related to intercompany bond holdings was taken from the adjusted trial balances of a parent and its 90 percent-owned subsidiary four years before the bond issue matured:

Construct the consolidation workpaper entries necessary to eliminate reciprocal balances (a) Assuming that the parent acquired its intercompany bond investment at the beginning of the current year, and(b) Assuming that the parent acquired its intercompany bond investment two years prior to the date of the adjusted trialbalance.

Transcribed Image Text:

Parent Subsidiary Investment in S bonds, $50,000 par Interest receivable Interest expense 10% bonds payable, $100,000 par Bond premium Interest income Interest payable $49,000 $9,000 100,000 4,000 5,250 5,000