Pratt Company, who owns an 80% interest in Smurfe Company, purchased $2,000,000 of Smurfe's 8% bonds at 106 on December 31, 2016. The bonds pay interest on January 1 and July 1 and mature on December 31, 2026. Pratt Company uses the cost method to account for its investment in Smurfe. Selected balances from December 31, 2016 accounts of the two companies are as follows: Required:
Prepare in general journal form the workpaper eliminations related to the bonds to consolidated the financial statements of Pratt and its subsidiary for the year ended December 31, 2016 and 2017.

Question

Pratt Company, who owns an 80% interest in Smurfe Company, purchased $2,000,000 of Smurfe's 8% bonds at 106 on December 31, 2016. The bonds pay interest on January 1 and July 1 and mature on December 31, 2026. Pratt Company uses the cost method to account for its investment in Smurfe. Selected balances from December 31, 2016 accounts of the two companies are as follows:  Required:
Prepare in general journal form the workpaper eliminations related to the bonds to consolidated the financial statements of Pratt and its subsidiary for the year ended December 31, 2016 and 2017.

Quizplus · Accepted Answer

The Answer of Pratt Company, who owns an 80% interest in Smurfe Company, purchased $2,000,000 of Smurfe's 8% bonds at 106 on December 31, 2016. The bonds pay interest on January 1 and July 1 and mature on December 31, 2026. Pratt Company uses the cost method to account for its investment in Smurfe. Selected balances from December 31, 2016 accounts of the two companies are as follows:  Required:
Prepare in general journal form the workpaper eliminations related to the bonds to consolidated the financial statements of Pratt and its subsidiary for the year ended December 31, 2016 and 2017.

Pratt Company, Who Owns an 80% Interest in Smurfe Company