Chapter 08 – Intercompany Indebtedness
E8–12 (continued)
d.
Consolidation entries, December 31, 20X6:
Bonds Payable
200,000
Premium on Bonds Payable
5,718
Interest Income
11,415
Investment in Bundle Company Bonds
192,615
Interest Expense
10,662
Gain on Bond Retirement
13,856
Eliminate intercompany bond holdings:
Interest Payable
11,000
Interest Receivable
11,000
Eliminate intercompany receivable/payable.
The basic entry (not shown) would be adjusted by 13,103 (10,662+13,856-
11,415=13,103) to complete the elimination process.
e.
Consolidation entries, December 31, 20X7:
Bonds Payable
200,000
Premium on Bonds Payable
4,988
Interest Income
22,905
Investment in Bundle Company Bonds
193,519
Interest Expense
21,270
Investment in Bundle Co.
9,173
NCI in NA of Bundle Co.
3,931
Eliminate intercompany bond holdings:
$9,173* = ($13,856 – 338 – 415) x 0.70
$3,931 = ($13,856 – 338 – 415) x 0.30
*Rounded up to balance entry
Interest Payable
11,000
Interest Receivable
11,000
Eliminate intercompany receivable/payable.
to complete the elimination process.
f.
Income assigned to noncontrolling interest in 20X7 is $14,510:
Net income reported by Bundle
$ 50,000
Adjustment for excess of interest income
over interest expense:
Interest income
$(22,905)
Interest expense
21,270
(1,635)
Realized net income
$ 48,365
Proportion of ownership held
x .30
Income assigned to noncontrolling interest
$ 14,510
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P8-14 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
17,874
Income from Temple Corporation
17,874
Record equity-method income: $29,790 x 0.60
b.
Entry recorded by Porter on its bonds payable:
Interest Expense
5,790
Bond Premium
610
Cash
6,400
c.
Entry recorded by Temple on bond investment:
Cash
6,400
Interest Income
5,790
Investment in Porter Company Bonds
610
