On January 1, 2000 Apple Compa
On January 1, 2000 Apple Company acquired all of the stock ofPear Company at book value. Apple accounts for its investment inPear using the initial value method and Pear doesn’t pay anydividends.
On January 1st 2015 Pear Company issued $1,000,000 face valuebonds for $930,000 These 7% bonds pay interest each July 1 andJanuary 1. Pear uses straight line amortization on these 20 yearbonds.
On January 1, 2020, Apple Company acquired all of the Pear bondsfor $955,000.
1. Make the necessary worksheet entries for 2020
2. In 2020, Apple reported unconsolidated income of $900,000 andPear reported income of $100,000 what is consolidated income
3. make the necessary worksheet entries for 2021
4. in 2021, Apple reported unconsolidated inocme of $800,000 andPear reported income $125,000 what is consolidated income
Answer:
Answer :-
| Requirment-(1) | |||
| Date | Account Title and Description | Debit | Credit |
| In the books of Patriot company | |||
| 1-Jan-2020 | Interest Expenses ($1,000,000x 7% x 0.5 Year) | $35,000 | |
| Premium on bonds payable | $1,750 | ||
| Cash | $36,750 | ||
| (to record interest expenses payment and amortisation ofPrimium on bonds payable (70,000 x 0.5/20 year)) | |||
| 1-Jul-2020 | Interest Expenses ($1,000,000x 7% x 0.5 Year) | $35,000 | |
| Premium on bonds payable | $1,750 | ||
| Cash | $36,750 | ||
| (to record interest expenses payment and amortisation ofPrimium on bonds payable (70,000 x 0.5/20 year)) | |||
| In the books of Chief company | |||
| 1-Jul-2020 | Cash | $33,500 | |
| Discounts on Investment in bonds | $1,500 | ||
| Interest income($1,000,000*7%*0.5 yaear) | $35,000 | ||
| (To record interest income and amortization of Discount oninvestment in Patriot bonds 45,000 x 0.5 year/15 years) | |||
| Requirment-(2) | |||
| Computation of consolidated income in 2019 | |||
| Particulars | $ | $ | |
| Patriot income | 900,000 | ||
| Chief income | 100,000 | 1,000,000 | |
| Adjustment: | |||
| Interest expenses | $70,000 | ||
| Premium on bonds payableamortized | $3,500 | ||
| Interest income | -$70,000 | ||
| Discounts on Investment in bondsamortized | $1,750 | $5,250 | |
| Consolidated income | $994,750 | ||
| Requirment-(3) | |||
| Date | Account Title and Description | Debit | Credit |
| In the books of Patriot company | |||
| 1-Jan-2021 | Interest Expenses ($1,000,000*7%*0.5year) | $35,000 | |
| Premium on bonds payable | $1,750 | ||
| Cash | $36,750 | ||
| (to record interest expenses payment and amortisation ofPrimium on bonds payable ((70,000 x 0.5/20 year))) | |||
| 1-Jul-2021 | Interest Expenses($1,000,000*7%*0.5year)) | $35,000 | |
| Premium on bonds payable | $1,750 | ||
| Cash | $36,750 | ||
| (to record interest expenses payment and amortisation ofPrimium on bonds payable (70,000 x 0.5/20 year)) | |||
| In the books of Chief company | |||
| 1-Jan-2021 | Cash | $33,500 | |
| Discounts on Investment in bonds | $1,500 | ||
| Interest income($1,000,000*7%*0.5 year) | $35,000 | ||
| (To record interest income and amortization of Discount oninvestment in Patriot bonds(45,000 x 0.5 year/15 years) | |||
| 1-Jul-2021 | Cash | $33,500 | |
| Discounts on Investment in bonds | $1,500 | ||
| Interest income ($1,000,000*7%*0.5 year) | $35,000 | ||
| (To record interest income and amortization of Discount oninvestment in Patriot bonds(45,000 x 0.5 year/15 years) | |||
| Requirment-(4) | |||
| Computation of consolidated income in 2020 | |||
| Particulars | $ | $ | |
| Patriot income | 800,000 | ||
| Chief income | 125,000 | 925,000 | |
| Adjustment: | |||
| Interest expenses | $70,000 | ||
| Premium on bonds payableamortized | $3,500 | ||
| Interest income | -70,000 | ||
| Discounts on Investment in bondsamortized | $3,000 | 6,500 | |
| Consolidated income | $918,500 |
"Our Prices Start at $11.99. As Our First Client, Use Coupon Code GET15 to claim 15% Discount This Month!!"
