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Consolidating Financial Statements for Intercompany Bond Purchase

Cartwright, Inc. has $1,000,000 of 10% bonds outstanding on December 31, 20X8. On January 1, 20X9, Adam Corp., an 80%-owned subsidiary of Cartwright, Inc., purchases a $250,000 part of Cartwright, Inc.'s outstanding bonds in the market for $245,000. Interest accrued by 12/31/X9 is $12,500.

Determine the eliminating entries necessary for the 20X9 consolidated financial statements.

Solution Summary

The Consolidated Financial Statement reflects all of the expenses for the subsidiary and parent company. Examine an intercompany sale and purchase of a bond.