81 Lamar Corporation owns 60 percent of Humbolt Corporation’s voting shares. On

Question

81

Lamar Corporation owns 60 percent of Humbolt Corporation’s voting shares. On January 1, 20X2, Lamar Corporation sold $160,000 par value, 10 percent first mortgage bonds to Humbolt for $166,000. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1.

Prepare the journal entries for 20X2 for Humbolt related to its ownership of Lamar’s bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your market rate of interest to 3 decimals. For example, .0547523 should be rounded to 5.475%)

     

Prepare the journal entries for 20X2 for Lamar related to the bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your market rate of interest to 3 decimals. For example, .0547523 should be rounded to 5.475%)

      

Prepare the worksheet consolidation entries needed on December 31, 20X2, to remove the effects of the intercorporate ownership of bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your market rate of interest to 3 decimals. For example, .0547523 should be rounded to 5.475%)

     

Lamar Corporation owns 60 percent of Humbolt Corporation’s voting shares. On January 1, 20X2, Lamar Corporation sold $160,000 par value, 10 percent first mortgage bonds to Humbolt for $166,000. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1.

Explanation / Answer

bond premium/discount amortisation per period= 6000 * 1/10 *6/12= 300 per 6 months

Ref Date Account Debit Credit workings a Jan.1 Investmnet in lamar bonds 160000 Discount on bonds receivable 6000 166000-160000 cash 166000 Jul.1 Cash 8000 160000*10% *6/12 Discount on bonds receivable 300 6000/10 *6/12 Interest revenue 7700 balance Dec.31 Interest receivable 8000 160000*10% *6/12 Discount on bonds receivable 300 6000/10 *6/12 Interest revenue 7700 balance b Jan.1 Cash 166000 Bonds payable 160000 Premium on bonds payable 6000 Jul.1 Premium on bonds payable 300 Interest expense 7700 Cash 8000 Dec.31 Premium on bonds payable 300 Interest expense 7700 Interest payable 8000 c Bonds payable 160000 Investmnet in lamar bonds 160000 Discount on bonds receivable 7200 Premium on bonds payable 7200 Interest expense 15400 Interest revenue 15400 Interest payable 7700 Interest receivable 7700 [worksheet entry]

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