Franklin Corporation owns 90 percent of the outstanding voting stock of Georgia
ID: 2446882 • Letter: F
Question
Franklin Corporation owns 90 percent of the outstanding voting stock of Georgia Company. On January 2, 2009, Georgia sold 7 percent bonds payable with a $5,000,000 face value maturing January 2, 2029 at a premium of $500,000. On January 1, 2011, Franklin acquired 20 percent of these same bonds on the open market at 97.66. Both companies use the straight-line method of amortization. What adjustment should be made to Franklin's 2012 beginning Retained Earnings as a result of this bond acquisition? The answer is 107,100. what are the steps?
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[To record the acquisition of bond]
How did you get the retained earnings in this problem?
Date Account title Debit ($) Credit ($) Bonds payable [5000000*20%*0.9] 900,000 Bond premium [50000*20%*3] 30,000 Retained earnings (G) 107,100 Retained earnings (G) 37,160 Bond investment [5500000*20%*97.66%] 1,074,260[To record the acquisition of bond]
How did you get the retained earnings in this problem?
Explanation / Answer
The confidence interval in Question 57 is based on the assumption of a large sample size. Is this sample size sufficiently large in this example? Explain how you arrived at your answer.
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