Question

In: Accounting

Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold...

Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold bonds with a par value of $645,000 at 98. Wood purchased $430,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in five years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1.

a. What amount of interest expense should be reported in the 20X4 consolidated income statement? (Do not round your intermediate calculations. Round your final answers to nearest whole dollar.)

b. Prepare the journal entries Wood recorded during 20X4 with regard to its investment in Carter bonds. (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%)

c.​ Prepare all worksheet consolidation entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X4. (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%)

Solutions

Expert Solution

GIVEN INFORMATION:

Wood Corporation owns 70 percent of Carter Company’s voting shares.

Carter sold bonds = $645000 at 98.

Wood purchased = $430,000.

Annual interest rate = 8 %.

Interest is paid semiannually on January 1 and July 1.

SOLUTION:

a:- In the solidified money related articulations, premium sum would be recorded as paid to the non partners.

Since on Jan 1 20X3, the bonds worth $430000 are obtained by Wood company at 98 consequently,

Bonds subscribe by Non affiliates = 645000 - 430000

= 215,000$

Therefore bonds subscribe by non affiliates is 215,000$

Loan fee given in the inquiry is thought to be 8% p.a intensified every year.

Since the intrigue is given semi-every year in this manner we need to discover the ostensible rate of enthusiasm by the accompanying formulae:

EFFECTIVE RATE = (1+ NOMINAL RATE / M)M -1

0.08 = (1 + NR /2 )2 - 1

1.08 = (1 + NR / 2 )2

N R = 7.486%

(or)

7.85% approx.

Thus , Interest to be recoreded in Consolidated Financial statements:

= (215000 * 7.85 / 2 * 100) *2

= (1687750 /2 *100) *2

= (843875 *100) *2

= 84387500 *2

= 168775000

(or)

168,775$(Nearest Dollar)

b :- JOURNAL ENTRY IN WOOD CORPORATIONS:

c :- JOURNAL ENTRY REQUIRED TO REMOVE THE EFFECT OF INTER CORPORATE BOND:

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold...
Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold bonds with a par value of $645,000 at 98. Wood purchased $430,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in five years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1. Required: a. What amount of interest expense should be reported in the 20X4 consolidated income statement?...
Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold...
Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold bonds with a par value of $615,000 at 98. Wood purchased $410,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in five years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1. Required: a. What amount of interest expense should be reported in the 20X4 consolidated income statement?...
Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold...
Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold bonds with a par value of $652,500 at 98. Wood purchased $435,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in five years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1. a. What amount of interest expense should be reported in the 20X4 consolidated income statement? (Do...
Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold...
Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold bonds with a par value of $645,000 at 98. Wood purchased $430,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in five years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1. a. What amount of interest expense should be reported in the 20X4 consolidated income statement? b....
Pan Corporation owns 65 percent of Sauce Corporation's voting shares. On January 1, 20X3, Pan Corporation...
Pan Corporation owns 65 percent of Sauce Corporation's voting shares. On January 1, 20X3, Pan Corporation sold $300,000 par value 7 percent bonds to Sauce when the market interest rate was 4 percent. The bonds mature in 15 years and pay interest semiannually on June 30 and December 31. Based on the information given above, in the preparation of the 20X3 consolidated financial statements, premium on bonds payable will be: credited for $95,766 in the consolidation entries. credited for $100,784...
Planner Corporation owns 60 percent of Schedule Company’s voting shares. During 20X3, Planner produced 25,000 computer...
Planner Corporation owns 60 percent of Schedule Company’s voting shares. During 20X3, Planner produced 25,000 computer desks at a cost of $82 each and sold 10,000 of them to Schedule for $94 each. Schedule sold 7,000 of the desks to unaffiliated companies for $130 each prior to December 31, 20X3, and sold the remainder in early 20X4 for $140 each. Both companies use perpetual inventory systems. Required: a. What amounts of cost of goods sold did Planner and Schedule record...
Planner Corporation owns 60 percent of Schedule Company’s voting shares. During 20X3, Planner produced 27,000 computer...
Planner Corporation owns 60 percent of Schedule Company’s voting shares. During 20X3, Planner produced 27,000 computer desks at a cost of $96 each and sold 12,000 of them to Schedule for $108 each. Schedule sold 8,000 of the desks to unaffiliated companies for $136 each prior to December 31, 20X3, and sold the remainder in early 20X4 for $146 each. Both companies use perpetual inventory systems. Required: a. What amounts of cost of goods sold did Planner and Schedule record...
Karlow Corporation owns 60 percent of Draw Company’s voting shares. During 20X3, Karlow produced 27,000 computer...
Karlow Corporation owns 60 percent of Draw Company’s voting shares. During 20X3, Karlow produced 27,000 computer desks at a cost of $86 each and sold 12,000 of them to Draw for $98 each. Draw sold 8,000 of the desks to unaffiliated companies for $142 each prior to December 31, 20X3, and sold the remainder in early 20X4 for $152 each. Both companies use perpetual inventory systems. a. What amounts of cost of goods sold did Karlow and Draw record in...
Light Corporation owns 80 percent of Sound Company's voting shares. On January 1, 20X7, Sound sold...
Light Corporation owns 80 percent of Sound Company's voting shares. On January 1, 20X7, Sound sold bonds with a par value of $300,000 when the market rate was 7 percent. Light purchased two thirds of the bonds; the remainder was sold to nonaffiliates. The bonds mature in ten years and pay an annual interest rate of 6 percent. Interest is paid semiannually on June 30 and Dec 31. 1. Based on the information given above, what amount of interest expense...
Light Corporation owns 80 percent of Sound Company's voting shares. On January 1, 20X7, Sound sold...
Light Corporation owns 80 percent of Sound Company's voting shares. On January 1, 20X7, Sound sold bonds with a par value of $300,000 when the market rate was 7 percent. Light purchased two thirds of the bonds; the remainder was sold to nonaffiliates. The bonds mature in ten years and pay an annual interest rate of 6 percent. Interest is paid semiannually on June 30 and Dec 31. Based on the information given above, what amount of interest expense should...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT