Peanut Corporation acquired 80 percent of Snoopy Company's voting shares on January 1,20X8,at underlying book value.On Dec.31,20X8,it also purchased $500,000 par value 8 percent Snoopy bonds,which had been issued on January 1,20X5 to Schulz Corporation (unaffiliated with either Peanut or Snoopy)at a $45,000 premium.The bonds were originally issued with a 12-year maturity and pay interest annually on December 31.During preparation of the consolidated financial statements for December 31,20X8,the following consolidating entry was included in the consolidation worksheet:

-Based on the information given above,what is the interest income that must be eliminated in preparing the 20X9 consolidated financial statements?

Question

Peanut Corporation acquired 80 percent of Snoopy Company's voting shares on January 1,20X8,at underlying book value.On Dec.31,20X8,it also purchased $500,000 par value 8 percent Snoopy bonds,which had been issued on January 1,20X5 to Schulz Corporation (unaffiliated with either Peanut or Snoopy)at a $45,000 premium.The bonds were originally issued with a 12-year maturity and pay interest annually on December 31.During preparation of the consolidated financial statements for December 31,20X8,the following consolidating entry was included in the consolidation worksheet:
 
-Based on the information given above,what is the interest income that must be eliminated in preparing the 20X9 consolidated financial statements?

Quizplus · Accepted Answer

Interest income that must be eliminated in preparing consolidated financial statements is the interest income recognized from intercompany transactions, as these are not realized from the perspective of the consolidated entity.

Peanut Corporation Acquired 80 Percent of Snoopy Company's Voting Shares