Prepare the worksheet consolidating entry

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Reference no: EM132461718

Prepare Journal Entries and Consolidation Entries Related to an Affiliate's Debt

S Company issued $1,000,000 par value 10-year bonds at 102 on January 1, 20X5, which M Corporation purchased. The coupon rate on the bonds is 9 percent. Interest payments are made semiannually on July 1 and January 1. On Jan 1, 20X8, P Company purchased $500,000 par value of the bonds from M for $492,200. P owns 65 percent of S's voting shares.

Required:

Question 1: What amount of gain or loss will be reported in S's 20X8 income statement on the retirement of bonds?

Question 2: Will a gain or loss be reported in the 20X8 consolidated financial statements for P for the constructive retirement of bonds? What amount will be reported?

Question 3: How much will P's purchase of the bonds change consolidated net income for 20X8?

Question 4: Prepare the worksheet consolidating entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements at December 31, 20X8.

Question 5: Prepare the worksheet consolidating entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements at December 31, 20X9.

Reference no: EM132461718

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