Question

Rock is an 80%-owned subsidiary of Gibberbird. On January 1, 2005, Rock issued $450,000 of $1,000...

Rock is an 80%-owned subsidiary of Gibberbird. On January 1, 2005, Rock issued $450,000 of $1,000 face amount 6% bonds at par. The bonds have interest payments on January 1 and July 1 of each year and mature on January 1, 2009. On July 1, 2006, Gibberbird purchased all 450 bonds on the open market for $1,030 per bond.

Required: With respect to the bonds, use General Journal format to:

1.

Record the 2006 journal entries from July 1 to December 31 on Rock’s books.

2.

Record the 2006 journal entries from July 1 to December 31 on Gibberbird’s books.

3.

Record the elimination entries for the consolidation working papers at December 31, 2006.

Please include the calculations for the eliminations and Gibberbird's books
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Journal entries in the books of Gibberbird

Date Particulars Debit Credit
July 1 Investment in bonds 463500
Cash 463500
  
Dec.31 Bond interest receivable 13500
Bond interest revenue 10800
Investment in Bonds 2700

Journal entries in the books of Rock

Particulars Debit Credit
Bond interest expenses 13500
Bond interest payable 13500

Elimination jounal entries:

Date Particulars Debit Credit
Dec.31 Bond interest payable 13500
Bond interest receivable 13500
Dec.31 Bonds payable 450000
Loss on bonds 13500
Bond interest revenue 10800
Bond interest expenses 13500
Investment in bonds 460800

Working Notes:

Interest calculation: 450000 * 6% *1/2 = $13500

5 periods: 13500 / 5 = $2700

13500 - 2700 = $10800

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
Sun Company is a 100%-owned subsidiary of Peter Company. On January 1, 2019, Sun Company has...
Sun Company is a 100%-owned subsidiary of Peter Company. On January 1, 2019, Sun Company has $500,000 of 8% bonds outstanding, with an unamortized discount of $5,000 that is being amortized on a straight-line basis over a 5-year remaining life to maturity. On that date, Peter Company purchased the bonds for $497,000. The bonds pay interest annually on December 31 and Peter amortizes the discount on its bond investment on a straight-line basis. Peter’s trial balance at December 31, 2019,...
On January 1, 2017, British Software Ltd. issued $450,000 of 20-year, 8% bonds that pay interest...
On January 1, 2017, British Software Ltd. issued $450,000 of 20-year, 8% bonds that pay interest semiannually on June 30 and December 31. The bonds were sold to investors at their par value. a. How much interest will British pay to the holders of these bonds every six months? Amount of interest b. Prepare the journal entries that British would make to record: (1) the issuance of the bonds on January 1, 2017; (2) the first interest payment on June...
issued 11% bonds, dated January 1, with a face amount of $800,000 on January 1, 2009....
issued 11% bonds, dated January 1, with a face amount of $800,000 on January 1, 2009. The bonds sold for $739,815 and mature in 2028 (20 years). For bonds of similar risk and maturity, the market yield was 12%. Interest is paid semiannually on June 30 and December 31. The company uses the effective interest method of amortization and has a calendar year end.   Instructions: Prepare the journal entries that Federal Semiconductors would make on January 1, June 30, December...
Parent acquired Subsidiary on January 1, 2020 at a price $450,000 in excess of book value....
Parent acquired Subsidiary on January 1, 2020 at a price $450,000 in excess of book value. Of that excess, $350,000 was allocated to an unrecorded patent with a 10-year life, with the remainder to goodwill. The parent uses the equity method to account for its investment in its subsidiary. In 2021, Subsidiary sold to Parent land having a book value of $90,000 for a total price of $244,000. Financial statements of the two companies for the year ended December 31,...
On January 1, 2017, Tamarisk Inc. issued $490,000 of 6%, 5-year bonds at par. Interest is...
On January 1, 2017, Tamarisk Inc. issued $490,000 of 6%, 5-year bonds at par. Interest is payable semiannually on July 1 and January 1. Prepare journal entries to record the following. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.) (a) The issuance of the bonds....
Devers Corporation issued $400,000 of 6% bonds on May 1, 2017. The bonds were dated January...
Devers Corporation issued $400,000 of 6% bonds on May 1, 2017. The bonds were dated January 1, 2017, and mature January 1, 2020, with interest payable July 1 and January 1. The bonds were issued at face value plus accrued interest. Prepare Devers’s journal entries for (a) the May 1 issuance, (b) the July 1 interest payment, and (c) the December 31 adjusting entry.
On January 1, a corporation issued $210,000 in bonds at face value. The bonds have a...
On January 1, a corporation issued $210,000 in bonds at face value. The bonds have a stated interest rate of 7 percent. The bonds mature in 10 years and pay interest once per year on December 31. Required: 1, 2 & 3. Prepare the required journal entries to record the bond issuance, interest payment on December 31, early retirement of the bonds. Assume the bonds were retired immediately after the first interest payment at a quoted price of 102. (If...
On January 1, 2016, Bishop Company issued 8% bonds dated January 1, 2016, with a face...
On January 1, 2016, Bishop Company issued 8% bonds dated January 1, 2016, with a face amount of $20.6 million. The bonds mature in 2025 (10 years). For bonds of similar risk and maturity, the market yield is 10%. Interest is paid semiannually on June 30 and December 31. 1. Determine the price of the bonds at January 1, 2016 2.Prepare the journal entry to record the bond issuance by Bishop on January 1, 2016 3.Prepare the journal entry to...
On January 1, 2020, Novotna AG purchased €400,000, 8% bonds of Aguirre Co. for €369,114. The...
On January 1, 2020, Novotna AG purchased €400,000, 8% bonds of Aguirre Co. for €369,114. The bonds were purchased to yield 10% interest. Interest is payable semiannually on July 1 and January 1. The bonds mature on January 1, 2025. Novotna Company plans to hold the bonds to collect contractual cash flows. On January 1, 2022, after receiving interest, Novotna Company sold the bonds for €370,726 to meet its liquidity needs. Required: a. Prepare the journal entry to record the...
1. On January 1, 2017, a subsidiary sold equipment to its parent for $520,000. The subsidiary’s...
1. On January 1, 2017, a subsidiary sold equipment to its parent for $520,000. The subsidiary’s original cost was $200,000 and as of January 1, 2017, $20,000 in depreciation had been recorded on the subsidiary’s books. At the date of sale, the equipment had a 10-year remaining life, straight-line. It is now December 31, 2021 (5 years since the sale), and the parent still holds the equipment. REQUIRED: Prepare the consolidation eliminating entries for 2021
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT