Several years ago Brant, Inc., sold $950,000 in bonds to the public. Annual cash interest of 8 percent ($76,000) was to be paid on this debt. The bonds were issued at a discount to yield 10 percent. At the beginning of 2019, Zack Corporation (a wholly owned subsidiary of Brant) purchased $190,000 of these bonds on the open market for $211,000, a price based on an effective interest rate of 6 percent. The bond liability had a carrying amount on that date of $770,000. Assume Brant uses the equity method to account internally for its investment in Zack. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021?

Several years ago Brant, Inc., sold $950,000 in bonds to the public. Annual cash interest of 8 percent ($76,000) was to be paid on this debt. The bonds were issued at a discount to yield 10 percent. At the beginning of 2019, Zack Corporation (a wholly owned subsidiary of Brant) purchased $190,000 of these bonds on the open market for $211,000, a price based on an effective interest rate of 6 percent. The bond liability had a carrying amount on that date of $770,000. Assume Brant uses the equity method to account internally for its investment in Zack. What consolidation entry would be required for these bonds on December 31, 2019 and December 31, 2021?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 1MC

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