Pachelor Corporation Owns 70% of the Outstanding Stock of Stabb

question 44

Essay

Pachelor Corporation owns 70% of the outstanding stock of Stabb Company.On January 1,2013,Stabb issued $1,000,000 in 7% bonds that matured on January 1,2018.At the time of issuance,the bonds were sold at a discount of $125,000.At January 2,2015,Pachelor purchased the bonds for $1,400,000,and constructively retired the debt.Interest is paid annually on January 1.Straight-line amortization is used by both companies.
Required:
1.Calculate the gain or loss that the consolidated entity incurred to retire the debt.
2.Prepare eliminating/adjusting entries for the consolidating work papers for the year ended
December 31,2015.

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Definitions:

Cutout Pressure

The pressure level at which a pressure switch deactivates, or a safety valve opens to prevent excessive pressure build-up in a system.

PMI

Project Management Institute, a global organization that offers certifications and promotes standards for project management.

Relay Valve

In air brake systems, a valve that receives a control signal and then uses a local supply of air to send out to actuator devices. Most relay valves replicate the signal pressure valve to the out circuit, but some are designed to amplify or modulate the signal.

Exhaust Port

An opening through which exhaust gases are expelled from an engine or machinery.