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Problem $8-16$A $($Algo$)$ Direct Sale of Bonds to Parent $($Straight$-$Line Method$)$ LO $8-2$

On January $1,20$X$1,$ Prize Corporation paid Morton Advertising $$119,700$ to acquire $70$ percent of Statue Company$$s stock. Prize also paid $$45,000$ to acquire $$50,000$ par value $8$ percent, $10-$year bonds directly from Statue on that date. This purchase represented one$-$half of the bonds that were originally issued. Interest payments are made on January $1$ and July $1.$ The fair value of the noncontrolling interest at January $1,20$X$1,$ was $$51,300,$ and book value of Statue$$s net assets was $$115,000.$ The book values and fair values of Statue$$s assets and liabilities were equal except for buildings and equipment, which had a fair value $$56,000$ greater than book value and a remaining economic life of $14$ years at January $1,20$X$1.$

The trial balances for the two companies as of December $31,20$X$3,$ are as follows:

Item Prize Corporation Statue Company

Debit Credit Debit Credit

Cash and Current Receivables $ $31,300$ $ $47,000$

Inventory $177,00084,000$

Land, Buildings, and Equipment $($net$)330,000182,000$

Investment in Statue Bonds $46,500$

Investment in Statue Stock $154,000$

Discount on Bonds Payable $7,000$

Operating Expenses $183,500142,000$

Interest Expense $26,0009,000$

Dividends Declared $46,0009,000$

Current Liabilities $ $40,300$ $ $36,000$

Bonds Payable $288,000100,000$

Common Stock $94,00044,000$

Retained Earnings $225,80094,000$

Sales $306,000206,000$

Interest Income $4,500$

Income from Statue Company $35,700$

Total $ $994,300$ $ $994,300$ $ $480,000$ $ $480,000$

On July $1,20$X$2,$ Statue sold land that it had purchased for $$17,000$ to Prize for $$25,000.$ Prize continues to hold the land at December $31,20$X$3.$ Assume Prize Corporation uses the fully adjusted equity method.

Required:

Prepare the journal entries for $20$X$3$ on Prize$$s books related to its investment in Statue$$s stock and bonds.

Prepare the entries for $20$X$3$ on Statue$$s books related to its bond issue.

Prepare consolidation entries needed to complete a worksheet for $20$X$3.$

Prepare a three$-$part consolidation worksheet for $20$X$3$ Required A

Prepare the journal entries for $203$ on Prize's books related to its investment in Statue's stock and bonds.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

$\backslash$table$[[$No$,$Date,General Journal,Debit,Credit$],[1,$January $1,20\backslash$times $3,$Cash,$0,2,000,],[,$Interest receivable,O$,,2,000],[2,$July $1,20\backslash$times $3,$Cash,$,2,000,],[,$Investment in Statue bonds,O$),186\backslash$times $,],[,$Interest income,$0,,2,186\backslash$times $],[3,$December $31,20$X$,$Cash,$0,6,300,],[,$Investment in Statue stock,O$,,6,300],[4,$December $31,20$x$,$Interest receivable,grad,$2,000,],[,$Investment in Statue bonds,$0,195\backslash$times $,],[,$Interest income,$2,,2,195\backslash$times $],[5,$December $31,20$x$,$Investment in Statue stock,grad,$24,990\backslash$times $,],[,$Income from Statue Company,O$,,24,990\backslash$times $],[6,$December $31,20$x$,$Income from Statue Company,$0,2,800,],[,$Investment in Statue stock,$\backslash$theta $,,2,800]]$ Answer is not complete.

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Prepare the entries for $203$ on Statue's books related to its bond issue.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

$\backslash$table$[[$No$,$Date,General Journal,Debit,Credit$],[1,$January $1,20\backslash$times $3,$Interest payable,$(,4,000,],[,$Cash,$\backslash$theta $,,4,000],[2,$July $1,20\backslash$times $3,$Interest expense,$\backslash$theta $,4,373\backslash$times $,],[,$Discount on bonds payable,$2,,373\backslash$times $],[,$Cash,O$,,4,000],[3,$December $31,20$x$,$Interest expense,$2,4,391\backslash$times $,],[,$Discount on bonds payable,$2,,391\backslash$times $],[,$Interest payable,$0,,4,000]]\backslash$table$[[$No$,$Event,Accounts,,Debit,Credit$],[$A$,1,$Common stock,$2,44,000,],[,$Retained earnings,$2,94,000,],[,$Income from Statue Company,$2,35,700\backslash$times $,],[,$NCl in Net Income of Statue Company,$2,15,300\backslash$times $,],[,$Dividends declared,$2,,9,000$vv$],[,$Investment in Statue stock,$2,,154,000\backslash$times $],[,$NCl in Net Assets of Statue Company stock,$2,,35,000\backslash$times $],[$B$,2,$Depreciation expense,$2,4,000,],[,$Income from Statue Company,$2,,2,800],[,$NCl in Net Income of Statue Company,$2,,1,200],[$C$,3,$Buildings and equipment,$2,56,000,],[,$Accumulated depreciation,$2,,12,000],[,$Investment in Statue bonds,$\backslash$times $,,30,800],[,$NCl in Net Assets of Statue Company stock,$2,,13,200],[$D$,4,$Investment in Statue stock,$2,5,600,],[,$NCl in Net Assets of Statue Company stock,$2,2,400$vv$,],[,$Land,$2,,8,000],[$E$,5,$Bonds payable,$2,50,000,],[,$Interest income,$2,4,382\backslash$times $,],[,$Investment in Statue bonds,$2,,46,500],[,$Interest expense,$2,,4,382\backslash$times $],[,$Discount on bonds payable,$2,,3,500],[$F$,6,$Interest payable,$2,2,000$vv$,],[,$Interest receivable,$2,,2,000$vv$]]$

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