Consolidation Worksheet with Sale of Bonds to Subsidiary
Porter Company purchased 60 percent ownership of Temple Corporation on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of the book value of Temple. On January 1, 20X1, Porter sold $80,000 par value 8 percent five-year bonds directly to Temple for $82,000. The bonds pay interest annually on December 31. Porter uses the fully adjusted equity method in accounting for its ownership of Temple. On December 31, 20X2, the trial balances of the two companies are as follows:
Item | Porter Company | Temple Corporation | ||
Debit | Credit | Debit | Credit | |
Cash and Accounts Receivable | $ 80,200 |
| $ 40,000 |
|
Inventory | 120,000 |
| 65,000 |
|
Buildings and Equipment | 500,000 |
| 300,000 |
|
Investment in Temple |
|
|
|
|
Corporation Stock | 102,000 |
|
|
|
Investment in Porter |
|
|
|
|
Company Bonds |
|
| 81,200 |
|
Cost of Goods Sold | 99,800 |
| 61,000 |
|
Depreciation Expense | 25,000 |
| 15,000 |
|
Interest Expense | 6,000 |
| 14,000 |
|
Dividends Declared | 40,000 |
| 10,000 |
|
Accumulated Depreciation |
| $175,000 |
| $ 75,000 |
Accounts Payable |
| 68,800 |
| 41,200 |
Bonds Payable |
| 80,000 |
| 200,000 |
Bond Premium |
| 1,200 |
|
|
Common Stock |
| 200,000 |
| 100,000 |
Retained Earnings |
| 230,000 |
| 50,000 |
Sales |
| 200,000 |
| 114,000 |
Interest Income |
|
|
| 6,000 |
Income from Temple Corp. |
| 18,000 |
|
|
Total | $973,000 | $973,000 | $586,200 | $586,200 |
Required
a.Record the journal entry or entries for 20X2 on Porter's books related to its investment in Temple.
b.Record the journal entry or entries for 20X2 on Porter's books related to its bonds payable.
c.Record the journal entry or entries for 20X2 on Temple's books related to its investment in Porter's bonds.
d.Prepare the elimination entries needed to complete a consolidated worksheet for 20X2.
e.Prepare a three-part consolidated worksheet for 20X2.
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