The Planes Company Owns 100% of the Outstanding Common Stock

question 49

Essay

The Planes Company owns 100% of the outstanding common stock of the Sands Company.Sands issued $100,000 of face value, 9%, 10-year bonds on January 1, 2016, for $96,000.The discount is being amortized on a straight-line basis.On January 1, 2018, Planes purchased all the bonds as an investment for $95,000.
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Required:
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Be specific in answering the following questions and include numerical explanations.
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a.How will this bond issue be recorded and accounted for in 2018 on the separate books of Planes and Sands?
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b.How will this bond issue be accounted for on the 2018 consolidated statements?
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c.How will this bond issue be recorded and accounted for in 2019 on the separate books of Planes and Sands?
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d.How will this bond issue be accounted for on the 2019 consolidated statements?

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Definitions:

Passenger Compartment

The area of a vehicle designed to accommodate passengers, excluding the trunk or cargo space.

Boiling Point

The temperature at which a liquid turns into vapor at a given pressure.

Output Speed

Refers to the speed at which a machine or a part of it, such as an engine or drive shaft, delivers power.

Torque Decreases

A condition where the force that causes rotation around an axis reduces, often affecting machinery performance.