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Question - PP Corporation owns 60% of SS Company's voting shares. On January 1, 20X1, SS sold bonds with a par value of $600,000 at 97. PP purchased $500,000 par value of the bonds and the remainder was sold to non affiliates. The bonds mature in 10 years and pay an annual interest rate of 6%. Interest is paid semi-annually on Jan 1 and Jul 1.
Required -
a) Give the journal entries SS recorded during 20X1 with regard to its bonds.
b) Give the journal entries PP recorded during 20X1 with regard to its investment in SS bonds.
c) Give all worksheet consolidation entries needed to remove the effects of the inter-corporate bond ownership in preparing consolidated financial statements for 20X1.
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