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In: Advanced Math

Several years ago Brant, Inc., sold $960,000 in bonds to the public. Annual cash interest of...

Several years ago Brant, Inc., sold $960,000 in bonds to the public. Annual cash interest of 9 percent ($86,400) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2016, Zack Corporation (a wholly owned subsidiary of Brant) purchased $160,000 of these bonds on the open market for $181,000, a price based on an effective interest rate of 7 percent. The bond liability had a carrying amount on that date of $930,000. Assume Brant uses the equity method to account internally for its investment in Zack.

  1. a. & b. What consolidation entry would be required for these bonds on December 31, 2016 and December 31, 2018?

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Colby Messinger answered 2 years ago
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