Wood Company issues $200,000 of 10 percent first mortgage bonds on Jan 1, 2004 a

Question

Wood Company issues $200,000 of 10 percent first mortgage bonds on Jan 1, 2004 at 105. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1. Brick Corporation purchased $140,000 of Granite;s bonds from the original purchaser on December 31, 2008. for $125,000. Brick owns 75 percent of Wood's common stock.

What amount of premium on bonds payable will be eliminated in the preparation of the 2008 consolidated financial statements?

What amount of gain or loss on bond retirement will be reported in the 2008 consolidated financial statements?

What amount of premium on bonds payable will be eliminated in the preparation of the 2009 consolidated financial statements?

What amount of interest income will be eliminated in the preparation of hte 2009 consolidated financial statements?

What amount of interest expense will be eliminated in the preparation of the 2009 consolidated financial statements?

What amount of constructive gain will be allocated to noncontrolling interest in 2008 consolidated financial statements?

Please show the steps and calculations! Thank you.

Explanation / Answer

1) Bond payable=200000/100 2000 2000*5 10000 years 10 premium amortization=(10,000/10years) 1000 Bricks interest in the corporation=(140000/200000) 70% premium on bonds payable for brick 700 premium to be eliminated in the consolidated finanacial statements is $700 2) gain or loss on retirement of bond=140000-125000 15000

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