The Planes Company Owns 100% of the Outstanding Common Stock

question 38

Essay

The Planes Company owns 100% of the outstanding common stock of the Sands Company. Sands issued $100,000 of face value, 9%, 10-year bonds on January 1, 20X3, for $96,000. The discount is being amortized on a straight-line basis. On January 1, 20X8, Planes purchased all the bonds as an investment for $95,000.
Required:
Be specific in answering the following questions and include numerical explanations.
a.How will this bond issue be recorded and accounted for in 20X8 on the separate books of Planes and Sands?
b.How will this bond issue be accounted for on the 20X8 consolidated statements?
c.How will this bond issue be recorded and accounted for in 20X9 on the separate books of Planes and Sands?
d.How will this bond issue be accounted for on the 20X9 consolidated statements?

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Definitions:

Caucus Method

A method of selecting political candidates or making policy decisions, usually within a political party or a legislative body, involving meetings of supporters or representatives.

Delegate Selection

The process by which political parties choose representatives (delegates) to attend their national conventions, typically through primaries or caucuses.

State Convention

A gathering or assembly at the state level, often for political, social, or educational purposes, which can involve decision-making or election processes.

Primary Election

A preliminary election to appoint delegates to a party conference or to select the candidates for a principal, especially presidential, election.