Wood Corporation owns 70 percent of Carter Company’s votingshares. On January 1, 20X3, Carter...

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Accounting

Wood Corporation owns 70 percent of Carter Company’s votingshares. 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; theremainder was sold to nonaffiliates. The bonds mature in five yearsand pay an annual interest rate of 8 percent. Interest is paidsemiannually on January 1 and July 1.
a.
What amount of interest expense should be reported in the 20X4consolidated income statement?
b.
Prepare the journal entries Wood recorded during 20X4 withregard to its investment in Carter bonds
1
Record the interest received on the bonds.
2
Record the interest received on the bonds.
3
Record the interest receivable on the bonds.
.
Prepare all worksheet consolidation entries needed to remove theeffects of the intercorporate bond ownership in preparingconsolidated financial statements for 20X4.
c.
Prepare all worksheet consolidation entries needed to remove theeffects of the intercorporate bond ownership in preparingconsolidated financial statements for 20X4.
1
Record the entry to eliminate the effects of the intercompanyownership in the bonds.
2
Record the entry to eliminate the intercompany interestreceivables/payables.

Answer & Explanation Solved by verified expert

4.4 Ratings (732 Votes)

	PART A
	Interest on bonds payable	$ 51,600.00
	Discount Amortization	$ 2,580.00
	Interst + Amortization	$ 54,180.00
	No. of years to amortize	$ 18,060.00

	PART B
DATE	PARTICULARS	DEBIT	CREDIT
01.01.2014	Cash	$ 17,200.00
	Interest receivable		$ 17,200.00
	(to record interest receivable)

01.07.2014	Cash	$ 17,200.00
	Inv in C company bonds	$ 860.00
	Interest receivable		$ 18,060.00
	(to record interest receivable)

31.12.2014	Interest receivable	$ 17,200.00
	Investment in C company bonds	$ 860.00
	Interst income		$ 18,060.00

	PART C
DATE	PARTICULARS	DEBIT	CREDIT
	Bonds Payable	$ 430,000.00
	Interest income	$ 36,120.00
	Investment in C company bonds		$ 424,840.00
	Bonds discount		$ 5,160.00
	Interest income		$ 36,120.00

	Interest payable	$ 17,200.00
	Interest receivable		$ 17,200.00

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In: AccountingWood Corporation owns 70 percent of Carter Company’s votingshares. On January 1, 20X3, Carter sold...Wood Corporation owns 70 percent of Carter Company’s votingshares. 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; theremainder was sold to nonaffiliates. The bonds mature in five yearsand pay an annual interest rate of 8 percent. Interest is paidsemiannually on January 1 and July 1.a.What amount of interest expense should be reported in the 20X4consolidated income statement?b.Prepare the journal entries Wood recorded during 20X4 withregard to its investment in Carter bonds1Record the interest received on the bonds.2Record the interest received on the bonds.3Record the interest receivable on the bonds..Prepare all worksheet consolidation entries needed to remove theeffects of the intercorporate bond ownership in preparingconsolidated financial statements for 20X4.c.Prepare all worksheet consolidation entries needed to remove theeffects of the intercorporate bond ownership in preparingconsolidated financial statements for 20X4.1Record the entry to eliminate the effects of the intercompanyownership in the bonds.2Record the entry to eliminate the intercompany interestreceivables/payables.