Question

In: Accounting

Big Co. owns 80% of the stock of Little Co. On 1/1/23 Little issues $100,000 of...

Big Co. owns 80% of the stock of Little Co. On 1/1/23 Little issues $100,000 of 10%, 10 year bonds directly to Big for $103,000.  Big and Little both use straight-line amortization.

Prepare elimination entries RELATING TO THIS INTERCOMPANY TRANSACTION for 2023 and 2024

Solutions

Expert Solution

Part 1

Interest payment (100000*10%)            10,000
Add: premium amortization                  300
Interest expense            10,300
Investment in Bond, on beginning          103,000
Less: premium amortization ((103000-100000)/10)                  300
Investment in bond, on Dec 31, 2023          102,700
Date General journal Debit Credit
Dec 31, 2023 Bond payable          100,000
Premium on bond payable              2,700
interest income            10,300
Interest expense              10,300
Investment in Bond            102,700
To record elimination entry.

Part 2

Investment in bond, on Dec 31, 2023          102,700
Less: premium amortization ((103000-100000)/10)                  300
Investment in bond, on Dec 31, 2024          102,400
Date General journal Debit Credit
Dec 31, 2024 Bond payable          100,000
Premium on bond payable              2,400
interest income            10,300
Interest expense              10,300
Investment in Bond            102,400
To record elimination entry.

ekkarill92 answered 3 years ago
Next > < Previous

Related Solutions

Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co sold a patent...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co sold a patent to Little Co for $32,000. The patent had a book value of $20,000 on that date, with a 4 year remaining useful life. On 5/1/26 Little sells the patent to a third party for $20,000. Little Co reports earnings of $50,000 each year. Big uses the FULL equity method to account for their investment in Little. Flag this Question Question 11 pts How much...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co sold a patent...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co sold a patent to Little Co for $32,000. The patent had a book value of $20,000 on that date, with a 4 year remaining useful life. On 5/1/26 Little sells the patent to a third party for $20,000. Little Co reports earnings of $50,000 each year. Big uses the FULL equity method to account for their investment in Little. 1. How much was the unrealized gain or...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co sold a patent...
Big Co. owns 60% of Little Co common stock. On 1/1/23 Big Co sold a patent to Little Co for $32,000. The patent had a book value of $20,000 on that date, with a 4 year remaining useful life. On 5/1/26 Little sells the patent to a third party for $20,000. Little Co reports earnings of $50,000 each year. Big uses the FULL equity method to account for their investment in Little. 1. How much was the unrealized gain or...
Big Co. owns 60% of the stock of Little Co.   On 1/1/22, Little Co sells land...
Big Co. owns 60% of the stock of Little Co.   On 1/1/22, Little Co sells land to Big Co for $50,000. The land had cost Little Co. $30,000 several years earlier. On 3/1/25, Big Co sells the land to a thirds party for $80,000 Little Co reports earnings of $50,000 each year. What is the unrealized gain on sale in 2022? What is the income to the NC Interest in 2022 and 2023? What is the income to the NC...
Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of...
Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of stock outstanding. Relevant data shown below: 1/1/21: Purchased 5,000 shares at $18/share, plus $10 commission. 11/1/21: Little Co. paid common dividends totaling $10,000 12/31/21: Little Co. stock trading at $20/share 4/1/22: Purchased 6,000 shares at $21/share, plus $10 commission 11/1/22: Little Co. paid dividends totaling $10,000 12/31/22: Little Co stock trading at $19/share 3/1/23: Sold 1,000 shares of Little Co stock at $19.50/share, less...
Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of...
Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of stock outstanding. Relevant data shown below: 1/1/21: Purchased 5,000 shares at $18/share, plus $10 commission. 11/1/21: Little Co. paid common dividends totaling $10,000 12/31/21: Little Co. stock trading at $20/share 4/1/22: Purchased 6,000 shares at $21/share, plus $10 commission 11/1/22: Little Co. paid dividends totaling $10,000 12/31/22: Little Co stock trading at $19/share 3/1/23: Sold 1,000 shares of Little Co stock at $19.50/share, less...
Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of...
Big Co. purchases shares of Little Co starting on 1/1/21. Little Co. has 100,000 shares of stock outstanding. Relevant data shown below: 1/1/21: Purchased 5,000 shares at $18/share, plus $10 commission. 11/1/21: Little Co. paid common dividends totaling $10,000 12/31/21: Little Co. stock trading at $20/share 4/1/22: Purchased 6,000 shares at $21/share, plus $10 commission 11/1/22: Little Co. paid dividends totaling $10,000 12/31/22: Little Co stock trading at $19/share 3/1/23: Sold 1,000 shares of Little Co stock at $19.50/share, less...
Assume that Big Company owns 40% of the stock of Little. Big is the largest shareholder...
Assume that Big Company owns 40% of the stock of Little. Big is the largest shareholder of Little. Little is not a publicly traded company, and there is no easy way to know the fair value of its stock. Explain why using the equity method of accounting for this investment provides financial statement users with better information than the cost method would. I am looking for two or more ways in which the equity method gives information that better reflects...
On 1/1/22 Big Co. acquires 40% of Little Co's voting stock for $300,000. Little Co's book...
On 1/1/22 Big Co. acquires 40% of Little Co's voting stock for $300,000. Little Co's book value on that date was $500,000. Little Co. had the following mis-valued assets at 1/1/22: Land: Undervalued by $40,000 (total) Inventory, FIFO basis: Undervalued by $20,000 (total) Equipment, 5 year life: undervalued by $30,000 (total) Any remaining differential is attributed to goodwill. During 2022, Little reports earnings of $50,000 and pays dividends of $10,000 During 2023, Little reports earnings of $60,000 and pays no...
On January 1, 2018, Riney Co. owned 80% of the common stock of Garvin Co. On...
On January 1, 2018, Riney Co. owned 80% of the common stock of Garvin Co. On that date, Garvin's stockholders' equity accounts had the following balances: Common stock ($5 par value) $ 250,000 Additional paid-in capital 110,000 Retained earnings 330,000 Total stockholders’ equity $ 690,000 The balance in Riney's Investment in Garvin Co. account was $552,000, and the noncontrolling interest was $138,000. On January 1, 2018, Garvin Co. sold 10,000 shares of previously unissued common stock for $15 per share....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT