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 5.1.2P
To determine
Introduction: Consolidation is a process in which financial statements of a subsidiary company is merged with financial statements of the parent company. In this process, effect of intercompany transactions are eliminated.
To prepare:The consolidated income statement.
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Tanner-UNF Corporation acquired as a long-term investment $240 million of 6% bonds, dated July 1, on July
1, 2018. The market interest rate (yield) was 8% for bonds of similar risk and maturity. Tanner-UNF paid $200
million for the bonds. The company will receive interest semiannually on June 30 and December 31. Company
management has classified the bonds as available-for-sale investments. As a result of changing market
conditions, the fair value of the bonds at December 31, 2018, was $210 million.
1. Prepare any journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018,
balance sheet.
2. Suppose Moody's bond rating agency downgraded the risk rating of the bonds motivating Tanner-UNF to
sell the investment on January 2, 2019, for $190 million. Prepare the journal entries necessary to record the
sale, including updating the fair-value adjustment, recording any reclassification adjustment, and recording
the sale
PLEASE SHOW WORK
Tanner-UNF Corporation acquired as a long-term investment $245 million of 8% bonds, dated July 1, on July 1, 2018. The market
interest rate (yield) was 10% for bonds of similar risk and maturity. Tanner-UNF paid $200 million for the bonds. The company will
receive interest semiannually on June 30 and December 31. Company management has classified the bonds as available-for-sale
investments. As a result of changing market conditions, the fair value of the bonds at December 31, 2018, was $205 million.
Required:
1. & 2. Prepare the journal entry to record Tanner-UNF's investment in the bonds on July 1, 2018 and interest on December 31, 2018, at
the effective (market) rate.
3. Prepare any additional journal entry necessary for Tanner-UNF to report its investment in the December 31, 2018, balance sheet.
Since its 100% acquisition of Dancer Corporation stock on December 31, 2012, Jones Corporation has maintained its investment under the equity method. However, due to Dancer’s earning potential, the price included a $40,000 payment for goodwill. At the time of the purchase, the fair value of Dancer’s assets equaled their book value. On January 2, 2014, Dancer Corporation issued 10-year, 7% bonds at a face value of $50,000. The bonds pay interest each December 31. On January 2, 2016, Jones Corporation purchased all of Dancer Corporation’s outstanding bonds for $48,000. The discount is amortized on a straight-line basis. They have been included in Jones’s long-term investment in bonds account. attached are the trial balances of both companies on December 31, 2016.1. Prepare the worksheet entries needed to eliminate the intercompany debt on December 31, 2016. 2. Prepare a consolidated income statement for the year ended December 31, 2016. Note: No worksheet is required.
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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