Dundee Company Issued $1,000,000 Par Value 10-Year Bonds at 102

question 19

Essay

Dundee Company issued $1,000,000 par value 10-year bonds at 102 on January 1,20X5,which Mega Corporation purchased.The coupon rate on the bonds is 9 percent.Interest payments are made semiannually on July 1 and January 1.On July 1,20X8,Perth Company purchased $500,000 par value of the bonds from Mega for $492,200.Perth owns 65 percent of Dundee's voting shares.
Required:
a.What amount of gain or loss will be reported in Dundee's 20X8 income statement on the retirement of bonds?
b.Will a gain or loss be reported in the 20X8 consolidated financial statements for Perth for the constructive retirement of bonds? What amount will be reported?
c.How much will Perth's purchase of the bonds change consolidated net income for 20X8?
d.Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements at December 31,20X8.
e.Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements at December 31,20X9.
Problem 37 (continued):

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Definitions:

High-Context Cultures

Cultures where communication relies heavily on underlying context, nonverbal cues, and the relationship between communicators rather than explicit words.

Verbal Content

The portion of communication that involves words and language, both spoken and written.

North America

A continent located in the Northern Hemisphere, mainly between the Atlantic and Pacific Oceans, consisting of countries such as the United States, Canada, and Mexico.

Negative Attitude

A personal disposition that reflects pessimism, dissatisfaction, or a general outlook of expecting the worst outcomes.