ON 1/1/2000 WWE COMPANY PURCHASED ALL OF THE STOCK OF NBA COMPANY AT BOOK VALUE.

Question

ON 1/1/2000 WWE COMPANY PURCHASED ALL OF THE STOCK OF NBA COMPANY AT BOOK VALUE. ON 1/1/2010 WWE ISSUED $1,000,000 OF 10% 2O YEAR BONDS AT 102 ($1,020,000). INTEREST IS PAID ANNUALLY ON JANUARY 1ST. ON 1/1/2014, NBA PURCHASED THESE BONDS FOR $968,000.

MAKE THE ENTRY WWE MADE WHEN IT SOLD THE BONDS IN 2010

MAKE THE ENTRY WWE MADE EACH DECEMBER 31 FOR INTEREST

MAKE THE ENTRY NBA MADE WHEN IT BOUGHT THE BOND

MAKE THE ENTRY NBA MAKES EACH DECEMBER 31 FOR INTEREST

MAKE THE WORKSHEET ENTRIES NEEDED IN 2014

MAKE THE WORKSHEET ENTRIES NEEDED IN 2015

Explanation / Answer

Solution:

Date Journal Debit Credit 01/01/2010 Cash          1,020,000 Premimum on Issue of Bonds 20,000 Bonds Payable 1,000,000 01/01/2011 Interest Expense - 10 % * 1,000,000              100,000 Cash 100,000 01/01/2014 Investment in Bonds Payable of WWE          1,000,000 Discount on issue of bonds 32,000 Cash 968,000 01/01/2015 Cash              100,000 Interest Received on Investment 100,000

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