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Part 1 | Loss on constructive retirement of bonds | ||
Purchase price of $50,000 par bonds April 1, 2006 | $ 53,600 | ||
Book value of bonds acquired: | |||
Par value | $ 100,000 | ||
Less: Unamortized discount $1,800 for 27 of 36 months | $ 2,400 | ||
Book value of bonds | $ 97,600 | ||
Intercompany bonds | 50% | $ 48,800 | |
Loss on constructive retirement of bonds | $ 4,800 | ||
Part 2 | Interest income and expense | ||
Interest income in consolidated income statement — 2006 | $ - | ||
Interest expense in consolidated income statement — 2006 | |||
$8,800 - ($8,800 3/4 year 50%) | $ 5,500 | ||
Part 3 | Interest receivable and payable | ||
Interest receivable in consolidated balance sheet at Dec 2006 | $ - | ||
Interest payable in consolidated balance sheet at Dec 2006 | $ 1,000 | ||
Part 4 | Consolidation working paper entries | ||
Loss on constructive retirement of bonds | $ 4,800 | ||
8% bonds payable | $ 49,100 | ||
Interest income | $ 2,100 | ||
Investment in Pan bonds | $ 52,700 | ||
Interest expense | $ 3,300 | ||
Interest payable | $ 1,000 | ||
Interest receivable | $ 1,000 |
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