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Part 4Intercompany Indebtedness (25 points) P Co. owns a 60% interest in S Corp., acquired in 2001 at underlying book value. On 1/1/2009, S borrowed...

Do I need eliminating entries for 2011, after the bonds have been sold to an outside party?
Part 4—Intercompany Indebtedness (25 points) P Co. owns a 60% interest in S Corp., acquired in 2001 at underlying book value. On 1/1/2009, S borrowed $300,000 cash from P, giving in exchange bonds payable with a face amount of $300,000 and an 8% coupon rate. Interest on the bonds is payable each December 31, and the bonds mature on 12/31/2018. P held S’s bonds through 1/1/2011. On that date, P sold the bonds to Universal Securities Corp., a non- affiliate, for $276,000, recording a loss of $24,000. Universal held the bonds through their maturity date, and S made all interest payments on schedule throughout the life of the bonds. All companies in this example have accounting years ending on 12/31. Questions (Place your answers here and on the next page. If necessary, assume straight-line amortization of bond discount or premium.) 1. What amounts should be reported as interest revenue in the 2009, 2010, and 2011 consolidated income statements? 2. What amounts should be reported as interest expense in the 2009, 2010, and 2011 consolidated income statements? 3. What loss should be reported in the 2011 consolidated income statement? 4. At what amount should bonds payable be reported in the 12/31/09, 12/31/10, and 12/31/11 consolidated balance sheets? 5. What consolidation worksheet eliminating entries should be made at 12/31/09, 12/31/10, and 12/31/11?
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