Question
In: Accounting
Wood Corporation owns 70 percent of Carter Company’s voting shares. On January 1, 20X3, Carter sold...
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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? (Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) |
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July 1, 20X4 Debit Cash 17200 (is correct), Debit Investment in Carter Company Bonds (is not 860) and Credit Interest Income (is not 18060). |
| 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%) |
Solutions
Expert Solution
In the entry you provided, when
cash is received in January, considering that the interest is
received in advance, no income will be recognised and interest
received in cash will be recorded as advance income. This advance
interest will be charged to profit and loss account over the next 6
months (as it is 6 months interest) along with the discount
element. Therefore, on day 1, though teh cash leg of the entry is
correct, the other 2 legs are not correct as there will be no
profit and loss impact before passage of time post purchase
ekkarill92 answered 11 months agoRelated 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.
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
$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?
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Based on the information given above, in the preparation of the
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Planner Corporation owns 60 percent of Schedule Company’s voting shares. During 20X3, Planner produced 27,000 computer...
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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
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thirds of the bonds; the remainder was sold to nonaffiliates. The
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percent. Interest is paid semiannually on June 30 and Dec 31. Based
on the information given above, what amount of interest expense
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