29 Jun Question 1. The Planes Company owns 100% of the outstanding common stock of the Sands Company. Sands issued $100,000 of face value, 9%, 10-year bonds on January 1, 20X3, for $96,000.
Question
1. The Planes Company owns 100% of the outstanding common stock of the Sands Company. Sands issued $100,000 of face value, 9%, 10-year bonds on January 1, 20X3, for $96,000. The discount is being amortized on a straight-line basis. On January 1, 20X8, Planes purchased all the bonds as an investment for $95,000.
Required:
Be specific in answering the following questions and include numerical explanations.
a. How will this bond issue be recorded and accounted for in 20X8 on the separate books of Planes and Sands?
b. How will this bond issue be accounted for on the 20X8 consolidated statements?
c. How will this bond issue be recorded and accounted for in 20X9 on the separate books of Planes and Sands?
d. How will this bond issue be accounted for on the 20X9 consolidated statements?
5-11
Chapter 5
2. Smart Corporation is a 90%-owned subsidiary of Phan Inc. On January 2, 20X6, Smart agreed to lease $400,000 of construction equipment from Phan for $3,000 a month on an operating lease. The equipment has a 10-year life and is being depreciated using the straight-line method.
Required:
Prepare the eliminations and adjustments required by the intercompany lease on the Figure 5-1 partial worksheet for December 31, 20X8. Key and explain all eliminations and adjustments.
5-12
Chapter 5
3. Tempo Industries is an 80%-owned subsidiary of Dalie Inc. On January 1, 20X8, Dalie leased an asset to Tempo and the following journal entries were made:
Tempo
Assets Under Capital Lease……………..
$21,561
Cash……………………………….
$ 5,000
Obligations Under Capital Lease……….
16,561
Dalie
Minimum Lease Payments Receivable……….
$20,000
Cash…………………………………
5,000
Unearned Interest Income……………..
$ 3,439
Asset (cost of asset leased)………….
18,000
Sales Profit on Leases……………….
3,561
The terms of the lease agreement require Tempo to make five payments of $5,000 each at the beginning of each year. The implicit interest rate used by both Dalie and Tempo is 8%.
Required:
Prepare the eliminations and adjustments required by the intercompany lease on the Figure 5-2 partial worksheet of December 31, 20X8. Key and explain all eliminations and adjustments.
5-13
Chapter 5
4. On January 1, 20X8, Pope Company acquired 100% of the common stock of Siegel Company for $300,000. On this date Siegel had total owners’ equity of $250,000.
Any excess of cost over book value is attributable to goodwill.
Also on July 1, 20X8, Siegel Company sold to outside investors $300,000 par value of 10-year, 10% bonds. The price received was equal to par. The bonds pay interest semi-annually on July 1 and January 1.
During 20X8 and 20X9, Pope has appropriately accounted for its investment in Siegel using the simple equity method.
During early 20X9, market interest rates on bonds similar to those issued by Siegel decreased to 8%. As a result, the market value of the bonds increased. On July 1, 20X9, Pope purchased $100,000 par value of Siegel’s bonds, paying $163,000. Pope still holds the bonds on December 31, 20X9 and has amortized the premiu
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.