Lamar Corporation owns 60 percent of Humbolt Corporation’s voting shares. On January 1, 20X2, Lamar Corporation sold $185,000 par value, 8 percent first mortgage bonds to Humbolt for $191,000. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1.
a. Prepare the journal entries for 20X2 for Humbolt related to its ownership of Lamar’s bonds.
Record the investment in the bonds of Lamar Corporation.
Record the semiannual interest income received.
Record the semiannual interest receivable.
b. Prepare the journal entries for 20X2 for Lamar related to the bonds.
Record the investment in Lamar Corporation bonds by Humbolt Corporation.
Record the payment of interest and the amortization of the bond premium.
Record the interest payable and the amortization of bond premium.
c. Prepare the worksheet consolidation entries needed on December 31, 20X2, to remove the effects of the intercorporate ownership of bonds
Record the entry to eliminate the intercompany bond holdings.
Record the entry to consolidate the intercompany receivables/payables.