29 Jun 7. On January 1, 20X8, Pare
Question
7. On January 1, 20X8, Parent Company purchased 90% of the common stock of Subsidiary Company for $350,000. On this date, Subsidiary had common stock, other paid in capital, and retained earnings of $20,000, $ 130,000, and $200,000 respectively.
Any excess of cost over book value is due to goodwill.
In both 20X8 and 20X9, Parent has accounted for the Investment in Subsidiary using the cost method.
On January 1, 20X8, Subsidiary sold $100,000 par value of 6%, ten-year bonds for $97,000. The bonds pay interest semi-annually on January 1 and July 1 of each year.
On January 1, 20X9, Parent repurchased all of Subsidiary’s bonds for $96,400. The bonds are still held on December 31, 20X9.
Both companies have correctly recorded all entries relative to bonds and interest, using straight-line amortization for premium or discount.
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