Pratt Company, Who Owns an 80% Interest in Smurfe Company

question 25

Essay

Pratt Company, who owns an 80% interest in Smurfe Company, purchased $2,000,000 of Smurfe's 8% bonds at 106 on December 31, 2016. The bonds pay interest on January 1 and July 1 and mature on December 31, 2026. Pratt Company uses the cost method to account for its investment in Smurfe. Selected balances from December 31, 2016 accounts of the two companies are as follows: Required:
Prepare in general journal form the workpaper eliminations related to the bonds to consolidated the financial statements of Pratt and its subsidiary for the year ended December 31, 2016 and 2017.

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Definitions:

Fringe Benefits

Non-wage compensations provided to employees in addition to their normal wages or salaries, such as health insurance, paid vacations, and retirement plans.

Americans with Disabilities Act

A civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places open to the general public.

Epileptic Seizure

A brief episode of signs or symptoms due to abnormal excessive or synchronous neuronal activity in the brain, associated with epilepsy.

Disparate Treatment

An illegal employment practice where an employee is treated differently or less favorably because of characteristics such as race, gender, age, religion, or nationality.