Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

Exercise 62

Several years ago Absalom, Inc., sold $800,000 in bonds to the public.Annual cash interest of 8 percent ($64,000) was to be paid on this debt.The bonds were issued at a discount to yield 10 percent.At the beginning of 2010, McDowell Corporation (a wholly owned subsidiary of Absalom) purchased $100,000 of these bonds on the open market for $121,655, a price based on an effective interest rate of 6 percent.The bond liability had a book value on that date of $668,778.What consolidation entry would be required for these bonds on
a.December 31, 2010
b.December 31, 2012