On January 1, 20X8, Parent Company purchased 90% of the common stock of Subsidiary Company for $360,000. On this date, Subsidiary had common stock, other paid in capital, and retained earnings of $20,000, $130,000, and $200,000 respectively. Any excess of cost over book value is due to goodwill. Parent account for the Investment in Subsidiary using the simple equity method.
On July 1, 20X8, Subsidiary sold $100,000 par value of 9%, ten-year bonds for $106,755, which resulted in an effective interest rate of 8%. The bonds pay interest semi-annually on January 1 and July 1 of each year. Subsidiary uses the effective-interest method of amortizing the premium.
An amortization table for 20X8 and 20X9 is presented below:
On July 1, 20X9, Parent repurchased all of Par's bonds for $94,153, which resulted in an effective interest rate of 10%. The bonds are still held at year end.
Both companies have correctly recorded all entries relative to bonds and interest.
Required:
Complete the Figure 5-8 worksheet for consolidated financial statements for the year ended of December 31, 20X9. Round all computations to the nearest dollar.

Question

On January 1, 20X8, Parent Company purchased 90% of the common stock of Subsidiary Company for $360,000. On this date, Subsidiary had common stock, other paid in capital, and retained earnings of $20,000, $130,000, and $200,000 respectively. Any excess of cost over book value is due to goodwill. Parent account for the Investment in Subsidiary using the simple equity method.
On July 1, 20X8, Subsidiary sold $100,000 par value of 9%, ten-year bonds for $106,755, which resulted in an effective interest rate of 8%. The bonds pay interest semi-annually on January 1 and July 1 of each year. Subsidiary uses the effective-interest method of amortizing the premium.
An amortization table for 20X8 and 20X9 is presented below:
  On July 1, 20X9, Parent repurchased all of Par's bonds for $94,153, which resulted in an effective interest rate of 10%. The bonds are still held at year end.
Both companies have correctly recorded all entries relative to bonds and interest.
Required:
Complete the Figure 5-8 worksheet for consolidated financial statements for the year ended of December 31, 20X9. Round all computations to the nearest dollar.

Quizplus · Accepted Answer

The Answer of On January 1, 20X8, Parent Company purchased 90% of the common stock of Subsidiary Company for $360,000. On this date, Subsidiary had common stock, other paid in capital, and retained earnings of $20,000, $130,000, and $200,000 respectively. Any excess of cost over book value is due to goodwill. Parent account for the Investment in Subsidiary using the simple equity method.
On July 1, 20X8, Subsidiary sold $100,000 par value of 9%, ten-year bonds for $106,755, which resulted in an effective interest rate of 8%. The bonds pay interest semi-annually on January 1 and July 1 of each year. Subsidiary uses the effective-interest method of amortizing the premium.
An amortization table for 20X8 and 20X9 is presented below:
  On July 1, 20X9, Parent repurchased all of Par's bonds for $94,153, which resulted in an effective interest rate of 10%. The bonds are still held at year end.
Both companies have correctly recorded all entries relative to bonds and interest.
Required:
Complete the Figure 5-8 worksheet for consolidated financial statements for the year ended of December 31, 20X9. Round all computations to the nearest dollar.

On January 1, 20X8, Parent Company Purchased 90% of the Common