Pachelor Corporation owns 70% of the outstanding stock of Stabb Company.On January 1,2010,Stabb issued $1,000,000 in 7% bonds that matured on January 1,2015.At the time of issuance,the bonds were sold at a discount of $125,000.At January 2,2012,Pachelor purchased the bonds for $1,400,000,and constructively retired the debt.Interest is paid annually on January 1.Straight-line amortization is used by both companies.
Required:
1.Calculate the gain or loss that the consolidated entity incurred to retire the debt.
2.Prepare eliminating/adjusting entries for the consolidating work papers for the year ended December 31,2012.

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The Answer of Pachelor Corporation owns 70% of the outstanding stock of Stabb Company.On January 1,2010,Stabb issued $1,000,000 in 7% bonds that matured on January 1,2015.At the time of issuance,the bonds were sold at a discount of $125,000.At January 2,2012,Pachelor purchased the bonds for $1,400,000,and constructively retired the debt.Interest is paid annually on January 1.Straight-line amortization is used by both companies.
Required:
1.Calculate the gain or loss that the consolidated entity incurred to retire the debt.
2.Prepare eliminating/adjusting entries for the consolidating work papers for the year ended December 31,2012.

Pachelor Corporation Owns 70% of the Outstanding Stock of Stabb