Question several years ago abrams inc sold 1120000 in bonds

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Reference no: EM13349356

Question :

Several years ago Abrams, Inc., sold $1,120,000 in bonds to the public. Yearly cash interest of 9 % ($100,800) was to be paid on this debt. The bonds were issued at a discount to yield 12%. At the starting of 2012, Bierman Corporation (a wholly owned subsidiary of Abrams) purchased $140,000 of these bonds on the open market for $161,000, a price based on an effectual interest rate of 7 percent. The bond liability had a book value on that date of $980,000. Consider Abrams uses the equity technique to account internally for its investment in Bierman.

a. What consolidation entry could be needed for these bonds on December 31, 2012?

Event General Journal Debit Credit

Entry B

b. What consolidation entry would be required for these bonds on December 31, 2014? (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Event General Journal Debit Credit

Entry *B

Reference no: EM13349356

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