Prior Retirement of Bonds (Effective Interest Method) Amazing Corporation purchas...

Prior Retirement of Bonds (Effective Interest Method)

Amazing Corporation purchased $100,000 par value bonds of its subsidiary, Broadway Company, on December 31, 20X5, from Lemon Corporation for $102,800. The 10-year bonds bear a 9 percent coupon rate, and Broadway originally sold them on January 1, 20X3, to Lemon at 95. Interest is paid annually on December 31. Amazing owns 85 percent of the stock of Broadway.

In preparing the consolidation worksheet at December 31, 20X6, Amazing’s controller made the following entry to eliminate the effects of the intercorporate bond ownership:

Required

With the information given, answer the following questions:

a. Prepare the journal entry made by Amazing in 20X6 to record its interest income on the Broadway bonds that it holds.

b. Prepare the elimination entry to remove the effects of the intercorporate bond ownership in completing a three-part consolidation worksheet at December 31, 20X5.

c. Broadway reported net income of $60,000 and $80,000 for 20X5 and 20X6, respectively.

Amazing reported income from its separate operations of $120,000 and $150,000 for 20X5 and 20X6, respectively. What amount of consolidated net income and income to the controlling interest will be reported in the consolidated income statements for 20X5 and 20X6?