ON JANUARY 1 2004 THE PANTHER COMPANY ACQUIRED ALL OF THE STOCK OF THE BRONCO CO

Question

ON JANUARY 1 2004 THE PANTHER COMPANY ACQUIRED ALL OF THE STOCK OF THE BRONCO COMPANY AT BOOK VALUE. NEITHER PANTHER NOR BRONCO COMPANIES PAY DIVIDENDS AND PANTHER ACCOUNTS FOR ITS OWNERSHIP OF BRONCO USING THE INITIAL VALUE METHOD. ON JANUARY 1, 2011 PANTHER COMPANY ISSUED $1,000,000 10 YEAR 8% BONDS FOR $930,000. PANTHER USES STRAIGHT LINE AMORTIZATION ON JANUARY 1, 2014 BRONCO COMPANY ACQUIRED ½ OF THE PANTHER BONDS IN THE OPEN MARKET PAYING $521,000 BRONCO ALSO USES STRAIGHT LINE AMORTIZATION E) PREPARE THE NECESSARY WORKSHEET ENTRIES FOR 2014 AND 2015

Explanation / Answer

E In the boks of Panther 2014 Interest Expenses A/C dr. 87000 To Cash 80000 To Discount on Bonds Payable 7000 2015 Interest Expenses A/C dr. 87000 To Cash 80000 To Discount on Bonds Payable 7000 In the boks of BRONCO Bonds recievable A/C dr                                      500,000 Premium on bonds                                        21,000 To cash         521,000 2014 Cash A/C dr. 40000 To interest on Bonds receivable 37000 To Premium on Bonds Reiecvable 3000 2015 Cash A/C dr. 40000 To interest on Bonds receivable 37000 To Premium on Bonds Reiecvable 3000 Working Panther 1000000*8%                                        80,000 Discount on Bond                                        70,000 Yearly Amortization 70000/10             7,000 Then yearly Interest Expenses is 80000+7000=           87,000 BRONCO 500000*8%                                        40,000 Premium on Bond                                        21,000 Yearly Amortization 21000/7             3,000 Then yearly Interest Income is 40000-3000=           37,000

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