Fargus Corporation Owned 51% of the Voting Common Stock of Sanatee

question 114

Essay

Fargus Corporation owned 51% of the voting common stock of Sanatee, 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 acquisition price.
On January 1, 2012, Sanatee sold $1,400,000 in ten-year bonds to the public at 108. The bonds pay a 10% interest rate every December 31. Fargus acquired 40% of these bonds on January 1, 2014, for 95% of the face value. Both companies utilized the straight-line method of amortization.
What consolidation entry would be recorded in connection with these intra-entity bonds on December 31, 2016?

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Definitions:

Correlated

A measure of the relationship between two variables, indicating how the change in one can predict the change in the other.

Multicollinearity

A statistical phenomenon in which two or more predictor variables in a multiple regression model are highly correlated, leading to difficulties in distinguishing their individual effects on the dependent variable.

Independent Variables

Variables in an experiment or model that are manipulated or categorized to observe their effect on dependent variables.

Highly Correlated

Refers to a strong statistical relationship between two or more variables where changes in one variable are closely associated with changes in another.