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    On January 1, 2009, Hedwig Corporation issued $500,000 par value, 10-year bonds at 15% interest payable annually on June 30 and December 31. On January 1, 2012, Senter Corporation, a 90%-owned subsidiary of Hedwig, purchased all of the bonds in the open market. The problem provides two cases for the original bond issue price by Hedwig and the purchase price by Senter to calculate any gains or losses and the corresponding journal entries to be made by each company on June 30, 2012, including any required intercompany eliminations in the consolidated financial statements.

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    On January 1, 2009, Hedwig Corporation issued $500,000 par value, 10-year bonds at 15% interest payable annually on June 30 and December 31. On January 1, 2012, Senter Corporation, a 90%-owned subsidiary of Hedwig, purchased all of the bonds in the open market. The problem provides two cases for the original bond issue price by Hedwig and the purchase price by Senter to calculate any gains or losses and the corresponding journal entries to be made by each company on June 30, 2012, including any required intercompany eliminations in the consolidated financial statements.

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    © All Rights Reserved
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    2 views1 page

    100

    Uploaded by

    Cindy Aprilia
    On January 1, 2009, Hedwig Corporation issued $500,000 par value, 10-year bonds at 15% interest payable annually on June 30 and December 31. On January 1, 2012, Senter Corporation, a 90%-owned subsidiary of Hedwig, purchased all of the bonds in the open market. The problem provides two cases for the original bond issue price by Hedwig and the purchase price by Senter to calculate any gains or losses and the corresponding journal entries to be made by each company on June 30, 2012, including any required intercompany eliminations in the consolidated financial statements.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    On January 1, 2009, Hedwig Corporation issued $500,000 par value, 10-year, 15% bonds.

    Interest is
    payable each June 30 and December 31. On January 1, 2012, Senter Corporation, a 90%-owned
    subsidiary, purchased on the open market all of the parent company bonds. Both companies have a
    December 31 year-end. For this problem, assume the following four independent cases.

    Issue Price by Hedwig Corporation on January 1, 2009 Case 1 $512,000 $514,000

    Purchase Hedwig by Senter Corporation on January 1, 2012 Case 2 488,000 486,000

    Required:

    A. For cases 1 and 2, compute the total constructive gain or loss and the portion allocated to each
    company.

    B. For cases 1 and 2 prepare the journal entry or entries to be made by Hedwig Corporation and
    Senter Corporation on June 30, 2012. Both companies amortize discounts and premiums each
    interest payment date and use the straight-line method of amortization. Assume that Hedwig uses
    the partial equity method to account for its investment in Senter

    C. For cases 1 and 2, prepare in general journal form the intercompany bond elimination entries
    required in the December 31, 2012, consolidated statements workpaper.

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