2023年最全江西财经大学高级财务会计国际学院题库

AdvancedAccounting,11e(Beams/Anthony/Bettinghaus/Smith)Chapter7IntercompanyProfitTransactions-BondsMultipleChoiceQuestions1)Ifthepricepaidbyaparentcompanytoacquirethedebtofasubsidiaryisgreaterthanthebookvalueoftheliability,a________occurs.A)realizedlossontheretirementofdebtfromtheviewpointofthesubsidiaryB)realizedgainontheretirementofdebtfromtheviewpointofthesubsidiaryC)constructivelossontheretirementofdebtfromtheviewpointoftheconsolidatedentityD)constructivegainontheretirementofdebtfromtheviewpointoftheconsolidatedentityAnswer:CObjective:LO1Difficulty:Easy2)Ifanaffiliatepurchasesbondsintheopenmarket,thebookvalueoftheintercompanybondliabilityatthetimeofpurchaseisA)alwaysassignedtotheparentcompanybecauseithascontrol.B)theparvalueofthebondslesstheunamortizeddiscountorplustheunamortizedpremium.C)parvalue.D)theparvalueofthebondsplustheunamortizeddiscountorlesstheunamortizedpremium.Answer:BObjective:LO1Difficulty:Easy3)Bondsissuedbyacompanyremainontheirbooksasaliability,butareconsideredconstructivelyretiredwhenA)thecompanyborrowsmoneyfromunaffiliatedentitiestore-purchaseitsownbondsatagain.B)Thecompanyborrowsmoneyfromanaffiliatetore-purchaseitsownbondsatagain.C)Thecompany'sparentorsubsidiarypurchasesthebondsfromoutsideentities.D)Thecompanyborrowsmoneyfromanaffiliatetorepurchaseitsownbondsatagainorataloss.Answer:CObjective:LO1Difficulty:Easy

Usethefollowinginformationtoanswerthequestion(s)below.PascalianCompanyownsa90%interestinSappCompany.OnJanuary1,,Pascalianhad$300,000,6%bondsoutstandingwithanunamortizedpremiumof$9,000.ThebondsmatureonDecember31,.Sappacquiredone-thirdofPascalian'sbondsintheopenmarketfor$97,000onJanuary1,.Bothcompaniesusestraight-lineamortizationofbonddiscounts/premiums.InterestispaidonDecember31.OnDecember31,,thebooksofthetwoaffiliatesheldthefollowingbalances:Pascalian'sbooks6%bondspayable $300,000Premiumonbonds 7,200Interestexpense 16,200Sapp'sbooksInvestmentinPascalianbonds $97,600Interestincome 6,6004)ThegainfromthebondpurchasethatappearedontheDecember31,consolidatedincomestatementwasA)$4,320.B)$4,800.C)$5,400.D)$6,000.Answer:DExplanation:D)BookvalueofPascalian'sbondsacquiredbySappequals1/3times($300,000+$9,000) $103,000Less:CostofacquiringPascalianbonds (97,000)Constructivegainonbonds $6,000Objective:LO2Difficulty:Moderate5)ConsolidatedInterestExpenseandconsolidatedInterestIncome,respectively,thatappearedontheconsolidatedincomestatementfortheyearendedDecember31,wasA)$10,800and$0.B)$10,800and$6,600.C)$0and$0.D)$16,200and$6,600.Answer:AExplanation:A)Consolidatedinterestexpense=$16,200×2/3 $10,800Objective:LO2Difficulty:Moderate

6)PrussiaCorporationowns80%thevotingstockofStadCorporation.OnJanuary1,,Prussiapaid$391,000cashfor$400,000parofStad's10%$1,000,000parvalueoutstandingbonds,dueonApril1,.Stad'sbondshadabookvalueof$1,045,000onJanuary1,.Straight-lineamortizationisused.Thegainorlossontheconstructiveretirementof$400,000ofStadbondsonJanuary1,wasreportedintheconsolidatedincomestatementintheamountofA)$14,000.B)$21,600.C)$23,000.D)$27,000.Answer:DObjective:LO2Difficulty:ModerateUsethefollowinginformationtoanswerthequestion(s)below.PfadtInc.had$600,000parof8%bondspayableoutstandingonJanuary1,dueJanuary1,withanunamortizeddiscountof$12,000.Senatisa90%-ownedsubsidiaryofPfadt.OnJanuary2,,SenatCorporationpurchased$150,000parvalueofPfadt'soutstandingbondsfor$152,000.ThebondshaveinterestpaymentdatesofJanuary1andJuly1.Straight-lineamortizationisused.7)Withrespecttothebondpurchase,theconsolidatedincomestatementofPfadtCorporationandSubsidiaryforshowedagainorlossofA)$4,500.B)$5,000.C)$10,800.D)$12,000.Answer:BExplanation:B)[($588,000×0.25)-$152,000]Objective:LO2Difficulty:Moderate8)BondInterestReceivableforofPfadt'sbondsonSenat'sbookswasA)$5,400.B)$6,000.C)$10,800.D)$12,000.Answer:BExplanation:B)[$150,000×8%×1/2]Objective:LO2Difficulty:Moderate

9)BondsPayableappearedintheDecember31,consolidatedbalancesheetofPfadtCorporationandSubsidiaryintheamountofA)$398,925.B)$441,000.C)$443,250.D)$450,000.Answer:CExplanation:C)[$591,000×75%]Objective:LO2Difficulty:ModerateUsethefollowinginformationtoanswerthequestion(s)below.PlentyCorporationissuedsixthousand,$1,000par,6%bondsonJanuary1,,atpar.InterestispaidonJanuary1andJuly1ofeachyear;thebondsmatureonJanuary1,.OnJanuary2,,ScrawnCorporation,a75%-ownedsubsidiaryofPlenty,purchased3,000ofthebondsontheopenmarketat102.50.Plenty'sseparatenetincomeforincludedtheannualinterestexpenseforall3,000bonds.Scrawn'sseparatenetincomeforwas$400,000,whichincludedthebondinterestreceivedonJuly1aswellastheaccrualofbondinterestrevenueearnedonDecember31.Bothcompaniesusestraight-lineamortizationofbonddiscounts/premiums.10)Whatwastheamountofgainor(loss)fromtheintercompanypurchaseofPlenty'sbondsonJanuary2,?A)$(56,250)B)$(75,000)C)$75,000D)$56,250Answer:BExplanation:B)Totalbookvalueacquired=$6,000,000×50% $3,000,000Purchaseprice3,000×$1,025 3,075,000Lossonconstructiveretirement $75,000Objective:LO2Difficulty:Moderate

11)Ifthebondswereoriginallyissuedat106,and80%ofthemwerepurchasedbyScrawnonJanuary2,at98,thegainor(loss)fromtheintercompanypurchasewasA)$(384,000).B)$(211,200).C)$211,200.D)$384,000.Answer:CExplanation:C)BookvalueatJanuary2,equals$6,360,000minus$216,000= $6,144,000Percentageofbondsacquired 80%Equalsbookvalueacquired 4,915,200Purchaseprice4,800bonds×$980= 4,704,000Gainonconstructiveretirement= $211,200Objective:LO2Difficulty:Moderate12)Ifthebondswereoriginallyissuedat103,and70%ofthemwerepurchasedonJanuary2,at104,theconstructivegainor(loss)onthepurchasewasA)$(142,800).B)$(42,000).C)$42,000.D)$142,800.Answer:AExplanation:A)BookvalueatJanuary2,equals$6,180,000minus$144,000 $6,036,000Percentageofbondsacquired 70%Equalsbookvalueacquired 4,225,200Purchaseprice4,200bonds×$1,040 4,368,000Lossonconstructiveretirement $142,800Objective:LO2Difficulty:Moderate13)Usingtheoriginalinformation,theamountofconsolidatedInterestExpenseforwasA)$135,000.B)$180,000.C)$270,000.D)$360,000.Answer:BExplanation:B)($6,000,000-$3,000,000)×6%Objective:LO2Difficulty:Moderate

14)Usingtheoriginalinformation,thebalancesfortheBondsPayableandBondInterestPayableaccounts,respectively,ontheconsolidatedbalancesheetforDecember31,wereA)$3,000,000and$90,000.B)$3,000,000and$180,000.C)$6,000,000and$90,000.D)$6,000,000and$180,000.Answer:AExplanation:A)Bondspayable$6,000,000minusbondsheldbyScrawnof$3,000,000.InterestaccruedonDecember31,willbetheinterestonbondsheldbynon-affiliatesor$3,000,000×6%×1/2yearObjective:LO2,3Difficulty:Moderate15)Usingtheoriginalinformation,theeliminationentriesontheconsolidationworkingpaperspreparedonDecember31,includedatleastA)debittoBondInterestExpensefor$360,000.B)credittoBondInterestExpensefor$180,000andadebittoBondInterestPayablefor$90,000.C)credittoBondInterestReceivablefor$180,000.D)debittoBondInterestRevenuefor$360,000.Answer:BObjective:LO2Difficulty:Moderate16)Noconstructivegainorlossarisesfromthepurchaseofanaffiliate'sbondsiftheA)affiliateisa100%-ownedsubsidiary.B)bondsarepurchasedatbookvalue.C)bondsarepurchasedwitharm's-lengthbargainingfromoutsideentities.D)gainorlosscannotbereasonablyestimated.Answer:BObjective:LO1Difficulty:Easy17)Thereareseveraltheoriesforallocatingconstructivegainsorlossesbetweenpurchasingandissuingaffiliates.TheAgencyTheoryA)doessobasedontheparvalueofthebondspurchased.B)assignstheentireconstructivegainorlosstotheparentbasedontheircontrolofthedecisiontopurchasethebonds.C)assignstheentireconstructivegainorlosstothesubsidiarybasedontheneedtohavethenoncontrollinginterestshareintheretirementofthedebt.D)assignstheentireconstructivegainorlosstowhichevercompanyissuedthebonds.Answer:DObjective:LO1Difficulty:Easy

18)PickleIncorporatedacquireda$10,000bondoriginallyissuedbyits80%-ownedsubsidiaryonJanuary2,.Thebondwasissuedinaprioryearfor$11,250,maturesJanuary1,,andpays9%interestatDecember31.Thebond'sbookvalueatJanuary2,is$10,625,andPicklepaid$9,500topurchaseit.Straight-lineamortizationisusedbybothcompanies.Howmuchinterestincomeshouldbeeliminatedin?A)$720B)$800C)$900D)$1,000Answer:DExplanation:D)$9,500-$10,000=discounttoamortizeasinterestexpenseover5years,or$100peryear+$900paidbyissuer.Objective:LO2,3Difficulty:ModerateUsethefollowinginformationtoanswerthequestion(s)below.PoeCorporationownsan80%interestinSeriCompanyacquiredatbookvalueseveralyearsago.OnJanuary2,,Seripurchased$100,000parofPoe'soutstanding10%bondsfor$103,000.ThebondswereissuedatparandmatureonJanuary1,.Straight-lineamortizationisused.SeparateincomesofPoeandSeriforare$350,000and$120,000,respectively.PoeusestheequitymethodtoaccountfortheinvestmentinSeri.19)ControllinginterestshareofconsolidatednetincomeforwasA)$443,600.B)$444,000.C)$444,400.D)$448,000.Answer:BExplanation:B)Poe'sseparateincome $350,000IncomefromSeri($120,000×80%) 96,000Less:LossonconstructiveretirementofPoebonds (3,000)Plus:Piecemealrecognitionoftheconstructiveloss($3,000/3years) 1,000Controllinginterestshare $444,000Objective:LO4Difficulty:Moderate20)NoncontrollinginterestshareforwasA)$23,000.B)$23,600.C)$24,000.D)$24,400.Answer:CExplanation:C)SincePoeistheissuingentity,thegainorlossisnotallocatedtothenoncontrollinginterest.Thenoncontrollinginterestshareis($120,000×20%)=$24,000.Objective:LO4Difficulty:ModerateExercises1)SeparatecompanyandconsolidatedincomestatementsforPittaandSojournCorporationsfortheyearendedDecember31,aresummarizedasfollows: Pitta Soujourn ConsolidatedSalesRevenue $500,000 $100,000 $600,000IncomefromSojourn 19,900 Bondinterestincome 6,000 Gainonbondretirement 3,000Totalrevenues 519,900 106,000 603,000 Costofsales $280,000 $50,000 $330,000Bondinterestexpense 9,000 3,600Otherexpenses 120,900 31,000 151,900Totalexpenses 409,900 81,000 485,500Consolidatednetincome 117,500Noncontrollinginterestshare 7,500SeparatenetincomeandCerestshareinconsolidatednetincome $110,000 $25,000 $110,000Theinterestincomeandexpenseeliminationsrelatetoa$100,000,9%bondissuethatwasissuedatparvalueandmaturesonJanuary1,.OnJanuary2,,aportionofthebondswaspurchasedandconstructivelyretired.Required:Answerthefollowingquestions.1. Whichcompanyistheissuingaffiliateofthebondspayable?2. Whatisthegainorlossfromtheconstructiveretirementofthebondspayablethatisreportedontheconsolidatedincomestatementfor?3. WhatportionofthebondspayableisheldbynonaffiliatesatDecember31,?4. IsSojournawholly-ownedsubsidiary?Ifnot,whatpercentagedoesPittaown?5. Doesthepurchasingaffiliateusestraight-lineoreffectiveinterestamortization?6. ExplainthecalculationofPitta's$19,900incomefromSojourn.

Answer:1. Pittaistheissuingaffiliate.2. Effectonconsolidatednetincome: Gainonconstructiveretirementofbonds $3,0003. PercentofbondsheldbynonaffiliatesatDecember31, is40%,computedas$3,600consolidatedinterestexpensedividedby$9,000interestexpenseofPitta.4. Sojournispartiallyownedasevidencedbythenoncontrollinginterestshare.Theownershippercentageis70%($7,500noncontrollinginterestsharedividedby$25,000incomeofSojourn=30%noncontrollinginterest.)5. Straight-lineamortization $100,000par×60%purchased $60,000 Purchaseprice5yearsbeforematurity 57,000 Gain 3,000 Nominalinterest($60,000×9%) $5,400 Discountamortization($3,000/5years) 600 Bondinterestincome $6,0006. Pitta'sincomefromSojourn ShareofSojourn'sreportedincome ($25,000×70%)= $17,500 Add:Constructivegain 3,000 Less:Piecemealrecognitionofconstructive gain (600) IncomefromSojourn $19,900Objective:LO1,2,4Difficulty:Moderate

2)PlattsIncorporatedpurchased80%ofScarabCompanyseveralyearsagowhenthefairvalueequaledthebookvalue.OnJanuary1,,Scarabhas$100,000of8%bondsthatwereissuedatfacevalueandhavefiveyearstomaturity.InterestispaidannuallyonDecember31.BothPlattsandScarabwouldusethestraight-linemethodtoamortizeanypremiumordiscountincurredintheissuanceorpurchaseofbonds.OnJanuary1,,PlattspurchasedallofScarab'sbondsfor$96,000.Required:1. PreparethejournalentriesinthatwouldberecordedbyPlattsandScarabontheirseparatefinancialrecords.2. PreparetheconsolidatingworkingpaperentriesrequiredfortheyearendingDecember31,.Answer:Requirement1:Plattsentries:1/1/11 Investmentinbonds $96,000 Cash $96,00012/31/11 Cash 8,000 Interestincome 8,000 Investmentinbonds 1,000 Interestincome 1,000Scarabentries:12/31/11 Interestexpense 8,000 Cash 8,000Requirement2:Consolidatingentries:12/31/11 Bondspayable 100,000 Investmentinbonds 97,000 Gainonretirementofdebt 3,000 Interestincome 9,000 Interestexpense 8,000 Gainonretirementofdebt 1,000Objective:LO2,3Difficulty:Moderate

3)PakaCorporationownsan80%interestinSandraCompany.PakaacquiredSandra'sbondsonJanuary2,.ThefollowinginformationisfromtheadjustedtrialbalancesatDecember31,,atwhichtimethebondshavethreeyearstomaturity.ThebondshaveinterestpaymentdatesofJanuary1andJuly1.Straight-lineamortizationisusedbybothcompanies. Paka SandraInvestmentinSandraBonds,$100,000par 98,5007%Bondspayable,$200,000 200,000Bondpremium 6,000Interestexpense 12,000Interestreceivable 7,000Interestincome 7,500Interestpayable 7,000Required:PreparethenecessaryconsolidationworkingpaperentriesonDecember31,withrespecttotheintercompanybonds.Answer: Debit Credit12/31 BondInterestPayable 7,000 BondInterestReceivable 7,00012/31 BondsPayable 100,000 InterestIncome 7,500 Bondpremium 3,000 InterestExpense(50%owned) 6,000 InvestmentinSandra'sBonds 98,500 Gainonretirementofbonds 6,000 SupportingComputations: CostofbondstoPaka($98,500-$500) $98,000 Bookvalueacquired1/1/where $2,000peryearisamortized ($200,000+$8,000)×50%= 104,000 Gainonconstructivebondretirement $6,000Objective:LO2,3Difficulty:Moderate

4)PheasantCorporationowns80%ofSalCorporation'soutstandingcommonstockthatwaspurchasedatbookvalueequaltofairvalueonJanuary1,.Additionalinformation:1. Pheasantsoldinventoryitemsthatcost$3,000toSalduringfor$6,000.One-halfofthismerchandisewasinventoriedbySalatyear-end.AtDecember31,,SalowedPheasant$2,000onaccountfromtheinventorysales.NootherintercompanysalesofinventoryhaveoccurredsincePheasantacquireditsinterestinSal.2. Pheasantsoldequipmentwithabookvalueof$5,000anda5-yearusefullifetoSalfor$10,000onDecember31,.TheequipmentremainsinusebySalandisdepreciatedbythestraight-linemethod.Theequipmenthasnosalvagevalue.3. OnJanuary2,,Salpaid$10,800for$10,000parvalueofPheasant's10-year,10%bonds.Thesebondswereoriginallysoldatparvalue,andhaveinterestpaymentdatesofJanuary1andJuly1,andmatureonJanuary1,.Straight-lineamortizationhasbeenappliedbySaltothePheasantbondinvestment.4. PheasantusestheequitymethodinaccountingforitsinvestmentinSal.

Required:CompletetheworkingpaperstoconsolidatethefinancialstatementsofPheasantCorporationandSalfortheyearendedDecember31,.

Answer:Objective:LO2,3Difficulty:Difficult

5)Phaunapaid$120,000forits80%interestinSchrubonJanuary1,whenSchrubhad$150,000oftotalstockholders'equity.OnJanuary1,,Phaunapurchased$50,000ofSchrubCorporation's8%bondsfor$48,000.Atthattime,$100,000ofbondshadbeenissuedbySchrub,andunamortizedpremiumwas$2,000.ThebondspayinterestonJune30andDecember31andmatureonDecember31,.BothPhaunaandSchrubusestraight-lineamortization.PhaunausestheequitymethodofaccountingforitsinvestmentinSchrub.Required:Prepareeliminating/adjustingentriesforthebondsontheconsolidatingworkpapersfortheyearendedDecember31,.Answer:12/31/Interestincome(8%×$50,000)+($2,000/5)4,400 Interestexpense(8%×$50,000)-($1,000/5) 3,800 Gainonretirementofbonds 600Bondspayable 50,000Premiumonbondspayable 800 Bondinvestment 48,400 Gainonretirementofbonds 2,400Premiumonbondspayable:$1,000-$1,000/5=$800Bondinvestment:$48,000+$2,000/5=$48,400 Supportingcomputations: Bookvalueofbonds ($102,000×50%) $51,000 Costofacquiring$50,000par (48,000) Constructivegain 3,000 Piecemealrecognitionofgain (600) UnrecognizedatDecember31, $2,400Objective:LO2,3Difficulty:Difficult

6)PelamiCorporationownsa90%interestinSunbirdCorporation.AtDecember31,,Sunbirdhad$3,000,000ofparvalue6%bondsoutstandingwithanunamortizedpremiumof$30,000.ThebondshaveinterestpaymentdatesofJanuary1andJuly1andmatureonJanuary1,.OnJanuary2,,Pelamipurchased$1,200,000parvalueofSunbird'soutstandingbondsfor$1,210,000.Assumestraight-lineamortization.Required:PreparethenecessaryconsolidationworkingpaperentrieswithrespecttotheintercompanybondsfortheyearendingDecember31,.Answer: Debit Credit12/31 BondInterestPayable 36,000 BondInterestReceivable 36,00012/31 PremiumonBondsPayable 9,000 BondsPayable 1,200,000 InterestRevenue 69,500 InterestExpense 69,000 InvestmentinSunbirdBonds 1,207,500 GainonRetirementofBonds 2,000 SupportingComputations: CostofbondstoPelami $1,210,000 Bookvalueacquired ($3,000,000+$30,000)×40%= 1,212,000 Gainonconstructivebondretirement $2,000 4yearsremaining PremiumonBondPayable $30,000x3/4×40% = $9,000 InterestExpense $1,200,000×6% = $72,000 Less:$30,000×1/4×40% = $3,000 $69,000 InterestRevenue $72,000-($10,000×1/4) = $69,500Objective:LO2,3Difficulty:Moderate

7)Spottisa75%-ownedsubsidiaryofPenthal.OnJanuary1,,Spottissued$900,000of$1,000faceamount8%bondsatpar.ThebondshaveinterestpaymentsonJanuary1andJuly1ofeachyearandmatureonJanuary1,.OnJuly2,,Penthalpurchasedall900bondsontheopenmarketfor$1,020perbond.Bothcompaniesusestraight-lineamortization.Required:Withrespecttothebonds,useGeneralJournalformatto:1. RecordthejournalentriesfromJuly1toDecember31onSpott'sbooks.2. RecordthejournalentriesfromJuly1toDecember31onPenthal'sbooks.3. RecordtheeliminationentriesfortheconsolidationworkingpapersfortheyearendingDecember31,.Answer:Requirement1Date AccountName Debit CreditSpott'sbooksJul01 BondInterestExpense 36,000 Cash($900,000×8%×½) 36,000Dec31 BondInterestExpense 36,000 BondInterestPayable 36,000Requirement2Penthal'sbooksJul02 InvestmentinSpottBonds 918,000 Cash 918,000Dec31 BondInterestReceivable 36,000 BondInterestRevenue 32,400 InvestmentinSpottBonds 3,600Requirement3:ConsolidatedWorkingPapersDec31 BondInterestPayable 36,000 BondInterestReceivable 36,000Dec31 BondsPayable 900,000 LossonBonds 18,000 BondInterestRevenue 32,400 BondInterestExpense 36,000 InvestmentinSpottBonds 914,400InterestRevenue:($900,000×8%×1/2)-($18,000premium/5periods)=$32,400Objective:LO2,3Difficulty:Moderate

8)SnackleInc.isa90%-ownedsubsidiaryofPashaCorp.OnJanuary1,,Snackleissued$400,000of$1,000faceamount8%bondsat$964perbond.InterestispaidonJanuary1andJuly1ofeachyearandcoverstheprecedingsixmonths.OnJuly2,,Pashapurchasedall400bondsontheopenmarketfor$1,030perbond.ThebondsmatureonDecember31,.Bothcompaniesusestraight-lineamortization.Required:Withrespecttothebonds,useGeneralJournalformatto:1. RecordthejournalentriesfromJuly1toDecember31onPasha'sbooks.2. RecordthejournalentriesfromJuly1toDecember31onSnackle'sbooks.3. RecordtheeliminationentriesfortheconsolidationworkingpapersfortheyearendingDecember31,.Answer:Date AccountName Debit CreditPasha'sbooksJul02 InvestmentinSnackleBonds 412,000 Cash 412,000 Dec31 BondInterestReceivable 16,000 BondInterestRevenue 12,000 InvestmentinSnackleBonds 4,000 Snackle'sbooksJul01 BondInterestExpense 18,400 Cash 16,000 DiscountonBondsPayable 2,400 Dec31 BondInterestExpense 18,400 BondInterestPayable 16,000 DiscountonBondsPayable 2,400ConsolidatedWorkingPapersDec31 BondInterestPayable 16,000 BondInterestReceivable 16,000 Dec31 BondsPayable 400,000 LossonBonds 19,200 BondInterestRevenue 12,000 BondInterestExpense 18,400 DiscountonBondsPayable 4,800 InvestmentinSnackleBonds 408,000(Bookvalueofbonds$392,800-purchasecost$412,000=$19,200loss)Objective:LO2,3Difficulty:Moderate

9)PopcornCorporationowns90%oftheoutstandingvotingcommonstockofSaltyCorporation.OnJanuary1,,Saltyissued$1,000,000faceamountof12%,$1,000bondspayableat119.20.ThebondspayinterestonJanuary1andJuly1ofeachyearandmatureonJanuary1,.OnJuly2,,Popcornpurchasedalloftheoutstandingbondsatapriceof107.50.Bothcompaniesusestraight-lineamortization.Required:1. PreparethejournalentriesforJuly1,throughDecember31,forPopcornCorporation.2.. PreparethejournalentriesforJuly1,throughDecember31,forSaltyCorporation.3. PreparetheeliminationentriesnecessaryontheconsolidatingworkingpapersfortheyearendedDecember31,.Answer:Requirement1July2,:Bondinvestment 1,075,000 Cash 1,075,000December31,:Interestreceivable 60,000 Interestrevenue 60,000($1,000,000×12%×1/2)Interestrevenue 15,000 Bondinvestment 15,000($75,000/5)Requirement2July1,:Interestexpense 60,000 Cash 60,000Premiumonbondspayable 12,000 Interestexpense 12,000December31,:Interestreceivable 60,000 Interestrevenue 60,000($1,000,000×12%×1/2)IPremiumonbondspayable 12,000 Interestexpense 12,000

Requirement3:December31,:Bondspayable 1,000,000Premiumonbondspayable 48,000Lossonretirementofbonds 12,000 Bondinvestment 1,060,000Bondinvestment:($1,075,000-$15,000)Lossonretirementofbonds 3,000Interestrevenu 45,000 Interestexpense 48,000Interestpayable 60,000 Interestreceivable 60,000July2,Paid $1,075,000Bookvalueofbonds 1,060,000[$1,000,000+($12,000×5)]Lossonretirement $15,000Objective:LO2,3Difficulty:Moderate

10)PeterCorporationownsa70%interestinSundownCorporationacquiredseveralyearsagoatapriceequaltobookvalueandfairvalue.OnDecember31,,Sundownhad$300,000parof6%bondsoutstandingwithanunamortizedpremiumof$30,000.ThebondsmatureinfiveyearsandpayinterestonJanuary1andJuly1.OnJanuary2,,Peteracquiredone-thirdofSundown'sbondsfor$117,000.PeterandSundownusestraight-lineamortization.Sundownreportsnetincomeof$250,000for.Peterusestheequitymethodtoaccountfortheinvestment.Required:1. CalculatePeter'sincomefromSundownfor.2. Calculatethenoncontrollinginterestsharefor.Answer:Preliminarycomputations:Bookvalueofbonds$330,000×1/3= $110,000Costofbonds 117,000Lossonconstructiveretirement $7,000Requirement1:IncomefromSundown:ShareofSundown'sincome($250,000×70%) $175,000Less:Constructiveloss($7,000×70%) (4,900)Plus:Piecemealrecognitionofloss($7,000/5years)×70% 980IncomefromSundown $171,080Requirement2:Noncontrollinginterestshare:Sundown'sreportedincome $250,000Less:Constructivelossonbonds (7,000)Plus:Piecemealrecognitionofloss 1,400Equals:Adjustedreportedincome $244,400Noncontrollingpercentage 30%Noncontrollinginterestshare $73,320Objective:LO3,4Difficulty:Moderate

11)PongoCompanyhas$2,000,000of6%bondsoutstandingonDecember31,withunamortizedpremiumof$60,000.ThesebondspayinterestsemiannuallyonJanuary1andJuly1andmatureonJanuary1,.Straight-lineamortizationisused.SyringInc.,90%-ownedsubsidiaryofPongo,buys$1,000,000parvalueofPongo'soutstandingbondsinthemarketfor$980,000onJanuary2,.Thereisonlyoneissueofoutstandingbondsoftheaffiliatedcompaniesandtheyhaveconsolidatedfinancialstatements.Fortheyear,Pongohasincomefromitsseparateoperations(excludinginvestmentincome)of$3,000,000andSyringreportsnetincomeof$200,000.Pongousestheequitymethodtoaccountfortheinvestment.Required:Determinethefollowing:1. Noncontrollinginterestsharefor.2. ControllingshareofconsolidatednetincomeforPongoCompanyandsubsidiaryfor.Answer:Requirement1Noncontrollinginterestshare($200,000×10%) $20,000Requirement2Controllinginterestshareofconsolidatednetincome:IncomefromPongo'soperations $3,000,000IncomefromSyring:Pongo'sshareofSyringincome=90%×$200,000 $180,000Add:Constructivegainonbondretirement($2,000,000+$60,000)×50%-980,000 50,000Less:Piecemealrecognitionofgain=$50,000/5years (10,000) 220,000Controllinginterestshare $3,220,000Objective:LO2,4Difficulty:Moderate

12)Pachel