Use the following information to answer the question(s)below.
Plenty Corporation issued six thousand,$1,000 par,6% bonds on January 1,2010,at par.Interest is paid on January 1 and July 1 of each year;the bonds mature on January 1,2015.On January 2,2012,Scrawn Corporation,a 75%-owned subsidiary of Plenty,purchased 3,000 of the bonds on the open market at 102.50.Plenty's separate net income for 2012 included the annual interest expense for all 3,000 bonds.Scrawn's separate net income for 2012 was $400,000,which included the bond interest received on July 1 as well as the accrual of bond interest revenue earned on December 31.Both companies use straight-line amortization of bond discounts/premiums.
-Using the original information,the elimination entries on the consolidation working papers prepared on December 31,2012 included at least

Question

Quizplus · Accepted Answer

Since Scrawn purchased 3,000 of the bonds, Plenty still has 3,000 bonds outstanding. Therefore, Plenty has to eliminate half of the bond interest expense and bond interest payable related to those bonds, since they are now owned by a subsidiary.

The elimination entry would be:

Credit Bond Interest Expense for $180,000
Debit Bond Interest Payable for $90,000

Use the Following Information to Answer the Question(s)below