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Chapter 8 Homework Solutions

Chapter 8 Homework Solutions - E8-1 a Investment in Lamar...

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E8-1 a. Investment in Lamar bonds 156,000 1/1 Cash 156,000 Cash 4,500 7/1 Interest revenue 4,200 Investment in Lamar bonds 300 12/31 Interest receivable 4,500 Interest revenue 4,200 Investment in Lamar bonds 300 b. Cash 156,000 1/1 Bonds payable 150,000 Premium on bonds payable 6,000 7/1 Interest expense 4,200 Premium on bonds payable 300 Cash 4,500 12/31 Interest expense 4,200 Premium on bonds payable 300 Interest payable 4,500 c. Interest revenue 8,400 Bonds payable 150,000 Premium on bonds payable 5,400 Interest expense 8,400 Investment in Lamar bonds 155,400 Interest payable 4,500 Interest receivable 4,500 E8-2 [Not assigned] Since the entry shown decreases the value of the bond, it must have been bought at a premium. Since it's amortizing \$250 over 20 periods, the original premium must have been \$5,000. The purchase price was \$105,000. After six semiannual payments, amortixing \$250 each time, the remaining investment balance is \$103,500 (\$105,000 - [6 x \$250]). Interest revenue 11,500 Bonds payable 100,000 Premium on bonds payable 3,500 Interest expense 11,500 Investment in Nettle bonds 103,500 Interest payable 6,000 Interest receivable 6,000

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E8-3 a. The consolidated entit should only report expense for bonds issued to outsiders. \$200,000 x 8% + \$4,000 (discount) x 1/5 = \$16,800. b. Remember, this is the second year of ownership, so there should already be an interest receivable on the books.) 1/1 Cash 16,000 [400,000 x 8% x 1/2] Interest receivable 16,000 7/1 Cash 16,000 Investment in Carter bonds 800 [400,000 x 2% / (5 x 2)] Interest revenue 16,800 12/31 Interest receivable 16,000 Investment in Carter bonds 800 Interest revenue 16,800 c.
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Chapter 8 Homework Solutions - E8-1 a Investment in Lamar...

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