Pancake Corporation owns 85 percent of Syrup Corporation's voting shares.On January 1,20X8,Pancake Corporation sold $200,000 par value 8 percent bonds to Syrup when the market interest rate was 5 percent.The bonds mature in 10 years and pay interest semiannually on June 30 and Dec 31.
-Based on the information given above,what amount of investment in bonds will be eliminated in the preparation of the 20X8 consolidated financial statements?

Question

Quizplus · Accepted Answer

The correct answer is A.The investment in bonds will be eliminated in the preparation of the 20X8 consolidated financial statements by the amount of the non-controlling interest's share of the investment. The non-controlling interest owns 15% of Syrup Corporation's voting shares, so its share of the investment in bonds is 15% of $200,000, or $30,000. The amount of investment in bonds that will be eliminated is therefore $200,000 - $30,000 = $170,000.

Pancake Corporation Owns 85 Percent of Syrup Corporation's Voting Shares