Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 5, Problem 2E
1.
To determine
Introduction: Consolidation is a process in which financial statements of subsidiary is merged with financial statements of the parent. In this process, effect of intercompany transactions are eliminated.
To show:. The effect of purchase of bonds on cosolidated net income.
2.
To determine
Introduction: Consolidation is a process in which financial statements of subsidiary is merged with financial statements of the parent. In this process, effect of intercompany transactions are eliminated.
To show:. The effect of purchase of bonds on the income distribution schedule.
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Linco Industries is a 90%- owned subsidiary of Sharp Incorporated. On January 1, 2015, Linco issued $100,000 of 10- year, 6% bonds for $86,580, to yield 8% interest. Interest is paid annually on January 1. The effective interest method is used to amortize the premium. Sharp purchased the bonds for $84,901 on January 2, 2018, when the market rate of interest was 9%. On the purchase date, the remaining discount on the bonds was $10,413. Linco’s 2018 net income was $500,000.1. Prepare the eliminations and adjustments required for this purchase on the December 31, 2018, consolidated worksheet. Amortization schedules will be needed to January 1, 2019.2. Prepare the 2018 income distribution schedule for the NCI.
Carlton Company is an 80%- owned subsidiary ofMirage Company. On January 1, 2015, Carlton sold $100,000 of 10-year, 7% bonds for $101,000. Interest is paid annually on January 1. The market rate for this type of bond was 9% on January 2, 2017, whenMirage purchased 60% of the Carlton bonds for $53,600. Discounts may be amortized on a straight-line basis. 1. Prepare the eliminations and adjustments required for this bond purchase on the December 31, 2017, consolidated worksheet. 2. Prepare the eliminations and adjustments required on the December 31, 2018, consolidated worksheet.
On January 2, 2015, Blue Spruce Corporation, a small company that follows ASPE, issued $1.8 million of 10% bonds at 98 due on
December 31, 2024. Legal and other costs of $180,000 were incurred in connection with the issue. Blue Spruce Corporation has a
policy of capitalizing and amortizing the legal and other costs incurred by including them with the bond recorded at the date of
issuance. Interest on the bonds is payable each December 31. The $180,000 of issuance costs are being deferred and amortized on
a straight-line basis over the 10-year term of the bonds. The discount on the bonds is also being amortized on a straight-line basis
over the 10 years. (The straight-line method is not materially different in its effect compared with the effective interest method.)
The bonds are callable at 102 (that is, at 102% of their face amount), and on January 2, 2020, the company called a face amount of
$1,000,000 of the bonds and retired them.
Ignoring income taxes, calculate the amount of…
Chapter 5 Solutions
Advanced Accounting
Ch. 5 - Prob. 1UTICh. 5 - Subsidiary Company S has $1000,000 of bonds...Ch. 5 - Plessor Industries acquired 80% of the outstanding...Ch. 5 - Company P purchased $100,000 of subsidiary Company...Ch. 5 - Prob. 5UTICh. 5 - Prob. 6UTICh. 5 - Prob. 7UTICh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3.1E
Ch. 5 - Prob. 3.2ECh. 5 - Prob. 4ECh. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Prob. 6.1ECh. 5 - Prob. 6.2ECh. 5 - Prob. 7.1ECh. 5 - Prob. 7.2ECh. 5 - Prob. 7.3ECh. 5 - Prob. 8.1ECh. 5 - Prob. 8.3ECh. 5 - Prob. 9ECh. 5 - Prob. 5.1.1PCh. 5 - Prob. 5.1.2PCh. 5 - Prob. 5.2PCh. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Prob. 5.7PCh. 5 - Prob. 5.8.1PCh. 5 - Prob. 5.8.2PCh. 5 - Prob. 5.9PCh. 5 - Prob. 5.10PCh. 5 - Prob. 5.14PCh. 5 - Prob. 5.2.1CCh. 5 - Prob. 5.2.2CCh. 5 - Prob. 5.3.1CCh. 5 - Prob. 5.3.2CCh. 5 - Prob. 5.3.3CCh. 5 - Prob. 5.3.4C
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