Opus, Incorporated, owns 90 percent of Bloom Company. On December 31,2012, Opus acquires half of Bloom's $500,000 outstanding bonds. These bonds had been sold on the open market on January 1, 2010, at a 12 percent effective rate. The bonds pay a cash interest rate of 10 percent every December 31 and are scheduled to come due on December 31, 2010. Bloom issued this debt originally for $435,763. Opus paid $283,550 for this investment, indicating an 8 percent effective yield.
(a) Assuming that both parties use the effective rate method, what gain or loss from the retirement of this debt should be reported on the consolidated income statement for 2012?
(b) Assuming that both parties use the effective rate method, what balances should appear in the investment in Bloom Bonds account on Opus's records and Bonds Payable account of Bloom as of December 31,2013?
(c) Assuming that both parties use the straight-line method, what consolidation entry would be required on December 31,2013, because of these bonds? Assume that the parent is not applying the equity method.© BrainMass Inc. brainmass.com October 17, 2018, 11:54 am ad1c9bdddf
Your tutorial is shown in Excel showing the schedules needed to amortize discount and premium and figure loss on retirement and the JEs for consolidation.
Preparing a Flexible budget: Home Depot
Prepare a flexible budget for next year for the company of your choice. The budget needs to be realistic and based on corporate and economic trends.
Set up the flexible budget at three levels for the income statement. Companies prepare budgets based on absorption and/or variable costing. Due to lack of information, we're limiting our budgeting to the absorption approach. You still need to estimate cost behavior based on trends.
Information to consider in determining the three levels.
What is the growth rate in sales for the past three years?
What is the current growth rate in the economy?
How are the competitiors doing?
Current interest rates and tax burdens.