Fargus Corporation owned 51% of the voting stock of Manatee Inc. the parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the purchase price.
On January 1, 2011, Manatee sold $1,400,000 in ten-year bonds to the public at 108. The bonds have a cash, or stated rate of 10% and the interest is payable every December 31. Fargus acquired 40% of these bonds on January 1, 2012, at an effective interest rate of 11%.
REQUIRED: Show all work to receive partial credit!
(a) What consolidation entry would have been recorded in connection with these intercompany bonds on 12/31/12?
(b) What consolidation entry would have been recorded in connection with these intercompany bonds on 12/31/13?
