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Bond Sale from Parent to Subsidiary (Straight-Line Method): Lamar Corporation owns 60 percent of Humbolt Corporation’s...

Bond Sale from Parent to Subsidiary (Straight-Line Method):

Lamar Corporation owns 60 percent of Humbolt Corporation’s voting shares. On January 1, 20X2, Lamar Corporation sold $150,000 par value, 6 percent first mortgage bonds to Hunbolt for $156,000. The current market interest rate is 5.475 percent. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1. Prepare entries using straight line amortization of bond discount or premium.

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a Journal entries recorded by Hunbolt
Jan 1, 20X2 Investment in Lamar corporation Bonds $156,000
Cash $156,000
July 1, 20X2 Cash $4,500
Interest Income $4,200
Investment in Lamar Corporation Bonds $300
Dec 31, 20X2 Interest receivable $4,500
Interest Income $4,200
Investment in Lamar Corporation Bonds $300
b Journal entries recorded by Lamar corporation
Jan 1, 20X2 Cash $156,000
Bonds Payable $150,000
Bonds Premium $6,000
July 1, 20X2 Interest expense $4,200
Bond Premium $300
Cash $4,500
Dec 31, 20X2 Interest expense $4,200
Bond Premium $300
Interest payable $4,500
c Eliminating entries on Dec 31, 20X2
Dec 31, 20X2 Bonds Payable $150,000
Bonds Premium $5,400
Interest income $8,400
Interest expense $8,400
Investment in Lamar corporation bonds $155,400
Dec 31, 20X2 Interest receivable $4,500
Interest payable $4,500

ekkarill92 answered 1 year ago
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