Sabu Is a 65%-Owned Subsidiary of Peerless

question 18

Essay

Sabu is a 65%-owned subsidiary of Peerless.On January 1,2010,Sabu issued $1,000,000 of $1,000 face amount 8% bonds at $980 per bond.The bonds have interest payments on December 31 of each year and mature on January 1,2015.On January 1,2011,Peerless purchased all 1,000 bonds on the open market for $1,010 per bond.Straight-line amortization is used by both companies.
Required: With respect to the bonds,use General Journal format to:
1.Record the journal entries on Sabu's books made from 2010 to 2015.
2.Record the journal entries on Peerless' books made from 2010 to 2015.
3.Record the elimination entries for the consolidation working papers for 2010 through 2015.

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Definitions:

Building

A structure with a roof and walls, such as a house or factory, designed for residential, commercial, or industrial purposes.

Accounting Cycle

Set of activities involved in converting information and individual transactions into financial statements.

Accountants

Professionals who perform financial functions related to the collection, accuracy, recording, analysis, and presentation of a business, organization, or individual's financial operations.

Cash Flow Method

An accounting technique that tracks the movement of cash in and out of a business, crucial for understanding its liquidity.