Chapter 8 Homework Solutions

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

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Unformatted text preview: E8-1a.Investment in Lamar bonds156,000 1/1 Cash156,000 Cash4,500 7/1 Interest revenue4,200 Investment in Lamar bonds300 12/31 Interest receivable4,500 Interest revenue4,200 Investment in Lamar bonds300 b.Cash156,000 1/1 Bonds payable150,000 Premium on bonds payable6,000 7/1 Interest expense4,200 Premium on bonds payable300 Cash4,500 12/31 Interest expense4,200 Premium on bonds payable300 Interest payable4,500 c.Interest revenue8,400 Bonds payable150,000 Premium on bonds payable5,400 Interest expense8,400 Investment in Lamar bonds155,400 Interest payable4,500 Interest receivable4,500 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. Thepurchase price was $105,000. After six semiannual payments, amortixing $250 each time, theremaining investment balance is $103,500 ($105,000 - [6 x $250]).Interest revenue11,500 Bonds payable100,000 Premium on bonds payable3,500 Interest expense11,500 Investment in Nettle bonds103,500 Interest payable6,000 Interest receivable6,000 E8-3a. The consolidated entit should only report expense for bonds issued to outsiders. $200,000 x8% + $4,000 (discount) x 1/5 = $16,800.b. Remember, this is the second year of ownership, so there should already be an interestreceivable on the books.)1/1 Cash16,000 [400,000 x 8% x 1/2]Interest receivable16,000 7/1 Cash16,000 Investment in Carter bonds800 [400,000 x 2% / (5 x 2)]Interest revenue16,800 12/31 Interest receivable16,000 Investment in Carter bonds800 Interest revenue16,800 c.Interest revenue33,600 Bonds payable400,000 Discount on bonds payable4,800 Interest expense33,600 Investment in Carter bonds395,200 Interest payable16,000 Interest receivable16,000 E8-4[Not assigned]a. Losses are debits and gains are credits, so if the eliminating entry has to be of thea....
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This note was uploaded on 04/12/2011 for the course ACC 5120 taught by Professor Weimer during the Fall '10 term at Wayne State University.

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

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