On January 1, 2019, 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 accounts for the Investment in Subsidiary using the simple equity method.

On January 1, 2019, Subsidiary sold $100,000 par value of 6%, ten-year bonds for $97,000.The bonds pay interest semi-annually on January 1 and July 1 of each year.

On January 1, 2021, Parent repurchased all of Subsidiary's bonds for $96,400.The bonds are still held on December 31, 2021.

Both companies have correctly recorded all entries relative to bonds and interest, using straight-line amortization for premium or discount.

Required:

Prepare the eliminating entries pertaining to the intercompany purchase of bonds for the year ended December 31, 2021.

Question

On January 1, 2019, 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 accounts for the Investment in Subsidiary using the simple equity method.
​
On January 1, 2019, Subsidiary sold $100,000 par value of 6%, ten-year bonds for $97,000.The bonds pay interest semi-annually on January 1 and July 1 of each year.
​
On January 1, 2021, Parent repurchased all of Subsidiary's bonds for $96,400.The bonds are still held on December 31, 2021.
​
Both companies have correctly recorded all entries relative to bonds and interest, using straight-line amortization for premium or discount.
​
Required:
​
Prepare the eliminating entries pertaining to the intercompany purchase of bonds for the year ended December 31, 2021.
​

Quizplus · Accepted Answer

The Answer of On January 1, 2019, 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 accounts for the Investment in Subsidiary using the simple equity method.
​
On January 1, 2019, Subsidiary sold $100,000 par value of 6%, ten-year bonds for $97,000.The bonds pay interest semi-annually on January 1 and July 1 of each year.
​
On January 1, 2021, Parent repurchased all of Subsidiary's bonds for $96,400.The bonds are still held on December 31, 2021.
​
Both companies have correctly recorded all entries relative to bonds and interest, using straight-line amortization for premium or discount.
​
Required:
​
Prepare the eliminating entries pertaining to the intercompany purchase of bonds for the year ended December 31, 2021.
​

On January 1, 2019, Parent Company Purchased 90% of the Common