Question

13. Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial...

13. Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2017, Pesto sold 11 percent bonds payable with a $10.4 million face value (maturing in 20 years) on the open market at a premium of $830,000. On January 1, 2020, Salerno acquired 40 percent of these same bonds from an outside party at 96.6 percent of face value. Both companies use the straight-line method of amortization. For a 2021 consolidation, what adjustment should be made to Pesto's beginning Retained Earnings as a result of this bond acquisition?

Multiple Choice

  • $398,720 increase

  • $407,020 increase

  • $423,640 increase

  • $415,320 increase

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value...
Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2014, Pesto sold 9 percent bonds payable with a $8.0 million face value (maturing in 20 years) on the open market at a premium of $1,020,000. On January 1, 2017, Salerno acquired 40 percent of these same bonds from an outside party at 96.6 percent of face value. Both companies use the straight-line method of...
Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value...
Pesto Company possesses 80 percent of Salerno Company's outstanding voting stock. Pesto uses the initial value method to account for this investment. On January 1, 2014, Pesto sold 6 percent bonds payable with a $14.0 million face value (maturing in 20 years) on the open market at a premium of $1,070,000. On January 1, 2017, Salerno acquired 40 percent of these same bonds from an outside party at 96.6 percent of face value. Both companies use the straight-line method of...
81. Franklin Corporation owns 90 percent of the outstanding voting stock of Georgia Company. On January...
81. Franklin Corporation owns 90 percent of the outstanding voting stock of Georgia Company. On January 2, 2009, Georgia sold 7 percent bonds payable with a $5,000,000 face value maturing January 2, 2029 at a premium of $500,000. On January 1, 2011, Franklin acquired 20 percent of these same bonds on the open market at 97.66. Both companies use the straight-line method of amortization. What adjustment should be made to Franklin's 2012 beginning Retained Earnings as a result of this...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the equity method to account for its investment in subsidiary. On January 1, 2012, the parent company issued to an unaffiliated company $1,000,000 (face value) 10 year, 10 percent bond payable for a $61,000 premium. The bonds pay interest in December 31 of each year. On January 1, 2015, the subsidiary acquired 40 percent of the bonds for $386,000. Both companies use straight-line amortization. In...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the equity method to account for its investment in subsidiary. On January 1, 2012, the parent company issued to an unaffiliated company $1,000,000 (face value) 10 year, 10 percent bond payable for a $61,000 premium. The bonds pay interest in December 31 of each year. On January 1, 2015, the subsidiary acquired 40 percent of the bonds for $386,000. Both companies use straight-line amortization. In...
Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired...
Cairns owns 75 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2011, Hamilton sold $1,200,000 in 10-year bonds to the public at 105. The bonds had a cash interest rate of 7...
Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired...
Cairns owns 70 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition. Cairns uses the equity method in its internal records to account for its investment in Hamilton. On January 1, 2014, Hamilton sold $1,100,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 8...
On January 1, 2017, Doone Corporation acquired 80 percent of the outstanding voting stock of Rockne...
On January 1, 2017, Doone Corporation acquired 80 percent of the outstanding voting stock of Rockne Company for $784,000 consideration. At the acquisition date, the fair value of the 20 percent noncontrolling interest was $196,000 and Rockne's assets and liabilities had a collective net fair value of $980,000. Doone uses the equity method in its internal records to account for its investment in Rockne. Rockne reports net income of $380,000 in 2018. Since being acquired, Rockne has regularly supplied inventory...
Fargus Corporation owned 51% of the voting common stock of Sanatee, Inc. The parent's interest was...
Fargus Corporation owned 51% of the voting common stock of Sanatee, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price. On January 1, 2010, Sanatee sold $1,400,000 in ten-year bonds to the public at 108. The bonds pay a 10% interest rate every December 31. Fargus acquired 40% of these bonds on April 1, 2012, for 95% of...
(20 pnts) Fargus Corporation owned 61% of the voting common stock of Sanatee, Inc. The parent's...
(20 pnts) Fargus Corporation owned 61% of the voting common stock of Sanatee, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price. On January 1, 2010, Sanatee sold $1,800,000 in ten-year bonds to the public at 108. The bonds pay a 10% interest rate every December 31. Fargus acquired 40% of these bonds on April 1, 2012, for...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT