Loss on Constructive Retirement
Apple Corporation holds 60 percent of Short way Publishing Company’s voting shares. Apple issued $500,000 of 10 percent bonds with a 10-year maturity on January 1, 20X2, at 90. On January 1, 20X8, Short way purchased $100,000 of the Apple bonds for $106,000. Partial trial balances for the two companies on December 31, 20X8, are as follows:
| Apple | Shortway |
| Corporation | Publishing Company |
Investment in Shortway Publishing Company Stock | $132,000 |
|
Investment in Apple Corporation Bonds |
| $106,000 |
Bonds Payable | 500,000 |
|
Discount on Bonds Payable | 15,000 |
|
Interest Expense | 55,000 |
|
Interest Income |
| 8,000 |
Interest Payable | 25,000 |
|
Interest Receivable |
| 5,000 |
Required
Prepare the worksheet eliminating entry or entries needed on December 31, 20X8, to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements.
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