In: Accounting
Reporting in the consolidated Balance Sheet
Reporting of Bonds Payable in consolidated balance sheet
Bonds Payable in individual balance sheet of Z Ltd= $5,00,07,50,000 (W.N. 1)
Bonds receivable in individual balance sheet of QQQ Ltd= $50,000,000
Thus, presentation of Bonds Payable in consolidated balance sheet (paybale- receivable)= $5,00,07,50,000-$50,000,000
= $4,95,07,50,000
Thus, value of bonds payable in consolidated B/S of Z Ltd= $4,95,07,50,000
Reporting of Interest income in consolidated balance sheet
Interest expense in individual balance sheet of Z Ltd= $22,40,000 (W.N.2)
Interest income in individual balance sheet of QQQ Ltd= $23,45,000
Interest income in consolidated balance sheet of Z Ltd= $2,345,000-$22,40,000= $1,05,000
Thus, interest income in consolidated balance sheet =$1,05,000
At year-end, the consolidated entity will recognize a gain of amount $50,000,000 related to the constructive retirement of the debt. The consolidated income statement interest income must be decreased by amount $22,40,000 and interest income will be decreased by $22,40,000
Workign Notes
W.N.1 Bonds Payable in individual balance sheet of Z Ltd
Bonds Payable= $5,00,00,00,000
(+) Unamortized premium= $7,50,000 (10,00,000-2,50,000)
Total Bonds Payable by Z Ltd= $5,00,07,50,000
W.N.2 Interest expense in individual balance sheet of Z Ltd
Interest expense =$22,90,000
(-) Amortization= $50,000
Total interest expense in the books of Z Ltd= $22,40,000