On January 1, 2016, Pope Company Acquired 100% of the Common

question 19

Essay

On January 1, 2016, Pope Company acquired 100% of the common stock of Siegel Company for $300,000.On this date Siegel had total owners' equity of $250,000.Any excess of cost over book value is attributable to goodwill.Pope accounts for its investment in Siegel using the simple equity method.
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Also on July 1, 2016, Siegel Company sold to outside investors $200,000 par value of 10-year, 10% bonds.The price received was equal to par.The bonds pay interest semi-annually on July 1 and January 1.
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During early 2019, market interest rates on bonds similar to those issued by Siegel decreased to 8%.As a result, the market value of the bonds increased.On July 1, 2019, Pope purchased $100,000 par value of Siegel's bonds, paying $112,695.Pope still holds the bonds on December 31, 2019 and has amortized the premium, using the effective-interest method which has resulted in interest income of $4,508 and a balance in the Investment in Subsidiary Bonds account of $112,203.
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Required:
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Prepare the eliminating entries pertaining to the intercompany purchase of the bonds for the year ended December 31, 2019.

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