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5. On January 1, 2015, Parent Company acquired 100% of the common stock of Sub Company for $300,000. On this date Sub had total owners' equity of $250,000. Any excess of cost over book value is attributable to goodwill. Parent accounts for its investment in Sub using the simple equity method. Also on January 1, 2016, Sub Company sold to outside investors $200,000 par value of 10-year, 10% bonds. The price received was equal to par. The bonds pay interest annually on January 1. During late 2019, market interest rates on bonds similar to those issued by Sub decreased to 8%. As a result, the market value of the bonds increased. On January 2, 2020, Parent purchased all of Subs bonds, paying $212,000. Parent still holds the bonds on December 31, 2020 and has amortized the premium, using the straight-line method. Required: Prepare the 2016 entries on the individual books of Sub Company, the 2020 entries on the individual books of Parent Company, and the eliminating entries pertaining to the intercompany purchase of the bonds for the year ended December 31, 2020. 9 pt 5. On January 1, 2015, Parent Company acquired 100% of the common stock of Sub Company for $300,000. On this date Sub had total owners' equity of $250,000. Any excess of cost over book value is attributable to goodwill. Parent accounts for its investment in Sub using the simple equity method. Also on January 1, 2016, Sub Company sold to outside investors $200,000 par value of 10-year, 10% bonds. The price received was equal to par. The bonds pay interest annually on January 1. During late 2019, market interest rates on bonds similar to those issued by Sub decreased to 8%. As a result, the market value of the bonds increased. On January 2, 2020, Parent purchased all of Subs bonds, paying $212,000. Parent still holds the bonds on December 31, 2020 and has amortized the premium, using the straight-line method. Required: Prepare the 2016 entries on the individual books of Sub Company, the 2020 entries on the individual books of Parent Company, and the eliminating entries pertaining to the intercompany purchase of the bonds for the year ended December 31, 2020. 9 pt

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