Question

Able Company issued $840,000 of 9 percent first mortgage bonds on January 1, 20X1, at 104....

Able Company issued $840,000 of 9 percent first mortgage bonds on January 1, 20X1, at 104. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1. Prime Corporation purchased $560,000 of Able’s bonds from the original purchaser on December 31, 20X5, for $556,000. Prime owns 60 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. Round your market rate of interest to 3 decimals. For example, .0547523 should be rounded to 5.475%.)

     

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. Round your market rate of interest to 3 decimals. For example, .0547523 should be rounded to 5.475%.)
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