Assignment
Constructive Retirement at Beginning of Year (Effective Interest Method)
Able Company issued $690,000 of 7 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $460,000 of Able's bonds from the original purchaser on January
1, 20X5, for $454,000. Prime owns 70 percent of Able's voting common stock.
Required:
a. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X5. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.)
Record the entry to eliminate the effects of the intercompany ownership in Able bonds for 20X5
1. Record the entry to eliminate the intercompany interest receivables/payables for 20X5.
b. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.)
Record the entry to eliminate the effects of the intercompany ownership in Able bonds for 20X6.
Record the entry to eliminate the intercompany interest receivables/payables for 20X6.