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.

---

Definitions:

Supply Curve

A graph that represents the relationship between the price of a good and the quantity of the good that suppliers are willing to offer for sale.

Socially Optimal

A condition that maximizes societal welfare, often referring to the optimal distribution of resources and goods.

Government Intervention

Government intervention involves actions taken by a government to affect the economy, which can include regulations, subsidies, and taxes, aiming to correct market failures or achieve social goals.

Optimal Supply

Refers to the ideal level of stock or inventory that a company should maintain to meet demand without incurring excess costs or shortages.