Stallion Corporation sold $100,000 par value, 10-year first mortgage bonds to Pony Corporation on January 1,...
Stallion Corporation sold $100,000 par value, 10-year first
mortgage bonds to Pony Corporation on January 1, 20X5. The bonds,
which bear a nominal interest rate of 12 percent, pay interest
semiannually on January 1 and July 1. The entry to record interest
income by Pony Corporation on December 31, 20X7, was as
follows:
Note: Assume using straight-line amortization of bond discount or
premium.
| General Journal | Debit | Credit |
| Interest Receivable | 6,000 | |
| Interest Income | 5,750 | |
| Investment in Stallion Corporation Bonds | 250 | |
Pony Corporation owns 65 percent of the voting stock of Stallion
Corporation, and consolidated statements are prepared on December
31, 20X7.
Required:
a. What was the original purchase price of the bonds to Pony
Corporation?
b. What is the balance in Pony’s bond investment account on December 31, 20X7?
c. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercompany ownership of bonds in preparing consolidated financial statements for 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Homework Answers
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