Answer:
Bonds payable = 1,000,000 x 40% = 400,000
Purchase price of the bonds = 400,000 x 92% = 368,000
Annual Organisation = (400000-368000)/(10-2) = 4000
Premium on bonds payable = 32000-4000 = 28000
Cash amount = 400000 x 8% = 32000
Intra entity expense = 32000 - 4000 = 28000
Intra entity Income = 32000+4000 = 36000
The Investment in bonds is computes below:
Investment in bonds = 368000+4000 = 372000
Book value as on Jan 14 = 1000000 x 110% = 1100000
Premium on bonds = 1100000 - 1000000 = 100000
Amortization of premium = (100000/10)x2 = 20000
Controlling Interest in bonds payable = (1100000-20000)x 40% =
432000
Gain on retirement of bonds = 432000-368000 = 64000
(a) Journal entry as on 31 Dec 2016
Date | Account title and explanation | Debit ($) | Credit ($) |
31-12-16 | Bonds payable | $400,000 | |
Interest Income | $36,000 | ||
Premium on bonds payable | $28,000 | ||
Gain on retirement of bond | $64,000 | ||
Interest expense | $28,000 | ||
Investment in bonds | $372,000 |
(b)
Investment in bonds = 372000+4000 = 376000
Investment in hanitton = 64000+28000-36000 = 56000
Premium on bonds payable = 28000-4000 = 24000
Date | Account title and explanation | Debit ($) | Credit ($) |
31-12-17 | Bonds payable | $400,000 | |
Interest Income | $36,000 | ||
Premium on bonds payable | $24,000 | ||
Gain on retirement of bond | $56,000 | ||
Interest expense | $28,000 | ||
Investment in bonds | $376,000 |
(c)
Investment in bonds = 376000+4000 = 380000
Investment in Hamitton = 56000+28000-36000 = 48000
Premium on bonds payable = 24000-4000 = 20000
Date | Account title and explanation | Debit ($) | Credit ($) |
31-12-18 | Bonds payable | $400,000 | |
Interest Income | $36,000 | ||
Premium on bonds payable | $20,000 | ||
Gain on retirement of bond | $48,000 | ||
Interest expense | $28,000 | ||
Investment in bonds | $380,000 |
Cairns owns 80 percent of the voting stock of Hamilton, Inc. The parent's interest was acquired...
Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton On January 1, 2014, Hamilton sold $1,000,000 in 10-year bonds to the public at 115. The bonds had a cash interest rate of 8...
Cairns owns 80 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2014, Hamilton sold $1,000,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 8...
Cairns owns 80 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2014, Hamilton sold $1,000,000 in 10-year bonds to the public at 115. The bonds had a cash interest rate of 9...
Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2014, Hamilton sold $2,000,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 8...
Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2014, Hamilton sold $2,200,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 8...
Problem 6-28 (LO 6-3) Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton On January 1, 2014, Hamilton sold $2,500,000 in 10-year bonds to the public at 105. The bonds had a cash...
Problem 6-28 (LO 6-3) Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton On January 1, 2014, Hamilton sold $2,500,000 in 10-year bonds to the public at 105. The bonds had a cash...
Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2014, Hamilton sold $1,200,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 9...
Cairns owns 80 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2014, Hamilton sold $2,100,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 9...
Fargus Corporation owned 55% of the voting common stock of Sanatee, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price. On January 1, 2017, Sanatee sold $1,400,000 in ten-year bonds to the public at 109. The bonds pay a 10% interest rate every December 31. Fargus acquired 50% of these bonds on January 1, 2019, for 95% of...