Chapter 08 – Intercompany Indebtedness
E8–12A (continued)
e.
Consolidation entries, December 31, 20X7:
Bonds Payable
200,000
Premium on Bonds Payable
4,000
Interest Income
23,200
Investment in Bundle Company Bonds
194,000
Interest Expense
21,200
Investment in Bundle Co.
8,400
NCI in NA of Bundle Co.
3,600
Eliminate intercompany bond holdings:
$4,000 = ($8,000 / 10 years) x 5 years
$23,200 = $22,000 + ($7,800 / 6.5 years)
$194,000 = $192,800 + ($7,800 / 6.5 years)
$21,200 = $22,000 – ($8,000 / 10 years)
$8,400 = ($13,000 – $1,000) x 0.70
$3,600 = ($13,000 – $1,000) x 0.30
Interest Payable
11,000
Interest Receivable
11,000
Eliminate intercompany receivable/payable.
The basic entry (not shown) would be adjusted by 2,000 (23,200-21,200) to
complete the elimination process.
f.
Income assigned to noncontrolling interest in 20X7 is $14,400:
Net income reported by Bundle
$ 50,000
Adjustment for excess of interest income
over interest expense:
Interest income
$(23,200)
Interest expense
21,200
(2,000)
Realized net income
$ 48,000
Proportion of ownership held
x .30
Income assigned to noncontrolling interest
$ 14,400
Chapter 08 – Intercompany Indebtedness
Eliminate intercompany receivable/payable.
The basic entry (not shown) would be adjusted by 200 (11,500-11,300) to complete
the elimination process.
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P8–14A Consolidation Worksheet with Sale of Bonds to Subsidiary
a.
Entries recorded by Porter on its investment in Temple:
Cash
6,000
Investment in Temple Corporation
6,000
Record dividends from Temple: $10,000 x 0.60
Investment in Temple Corporation
18,000
Income from Temple Corporation
18,000
Record equity-method income: $30,000 x 0.60
b.
Entry recorded by Porter on its bonds payable:
Interest Expense
6,000
Bond Premium
400
Cash
6,400
Record interest payment: $400 = ($82,000 – $80,000) / 5 years
c.
Entry recorded by Temple on bond investment:
Cash
6,400
Interest Income
6,000
Investment in Porter Company Bonds
400
