HomeworkLib
Question

Q3. Assume that a parent company owns 80 percent of its subsidiary. The parent company uses...

Q3. 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 preparing the consolidated financial statements for the year ended December 31, 2016, what is the consolidation entry adjustment?

business   accounting   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

0 0
Add a comment
Know the answer?
Add Answer to:
Q3. Assume that a parent company owns 80 percent of its subsidiary. The parent company uses...
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. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Assume that a parent company owns 75 percent of its subsidiary. On January 1, 2016, the...

    Assume that a parent company owns 75 percent of its subsidiary. On January 1, 2016, the parent company had a $100,000 (face value) 8 percent bond payable outstanding with a carrying value of $94,000. Several years ago, the bond was originally issued to an unaffiliated company for 92% of par value. On January 1, 2016, the subsidiary acquired the bond for $91,000. During 2016, the parent company reported $400,000 of (pre-consolidation) income from its own operations (prior to any equity...

  • A Parent Company owns 100% of its Subsidiary. During 2013, the Parent company reports net income...

    A Parent Company owns 100% of its Subsidiary. During 2013, the Parent company reports net income of $1,000,000 and the subsidiary reports net income of $400,000. The Parent had a bond payable outstanding on July 1, 2012, with a carry value equal to $840,000. The Subsidiary acquired the bond on July 1, 2012 for $790,000. During 2013, the Parent reported interest expense (related to the bond) of $70,000 while the Subsidiary reported interest income (related to the bond) of $64,000....

  • If a company sells a depreciable asset to its subsidiary at a profit on December 31,...

    If a company sells a depreciable asset to its subsidiary at a profit on December 31, 20X3, what account balances must be eliminated or adjusted in preparing the consolidated income statement for 20X3? If the sale instead occurred on January 1, 20X3, what additional account(s) will require adjustment in preparing the consolidated income statement? When a parent company sells land to a subsidiary at more than book value, the consolidation entries at the end of the period include a debit...

  • Cairns owns 80 percent of the voting stock of Hamilton, Inc. The parent's interest was acquired...

    Cairns owns 80 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 $1,000,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 8...

  • Cairns owns 80 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired...

    Cairns owns 80 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 $1,000,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 8...

  • 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 $1,000,000 in 10-year bonds to the public at 115. The bonds had a cash interest rate of 8...

  • Cairns owns 80 percent of the voting stock of Hamilton, Inc. The parent’s interest was acquired...

    Cairns owns 80 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 $1,000,000 in 10-year bonds to the public at 115. The bonds had a cash interest rate of 9...

  • 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 $1,200,000 in 10-year bonds to the public at 110. The bonds had a cash interest rate of 9...

  • Consolidation spreadsheet for continuous sale of inventory - Equity method Assume that a parent c...

    Consolidation spreadsheet for continuous sale of inventory - Equity method Assume that a parent company acquired a subsidiary on January 1, 2010. The purchase price was 500,000 million in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date and that excess was assigned to the following AAP assets Original Original Useful Amount Life (years) AAP Asset Property, plant and equipment (PPE), net Customer list Royalty agreement Goodwill $100,000 185,000 115,000 100,000 $500,000 20 indefinite The AAP...

  • Prepare consolidation spreadsheet for intercompany sale of equipment- Equity Method Assume a parent company acquired its...

    Prepare consolidation spreadsheet for intercompany sale of equipment- Equity Method Assume a parent company acquired its subsidiary on January 1, 2015, at a purchase price that was $222,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $132,000 was assigned to a Customer List that is being amortized over a 10-year period. The remaining $90,000 was assigned to Goodwill. In January of 2018, the wholly owned subsidiary sold Equipment to the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT