Platts Incorporated Purchased 80% of Scarab Company Several Years Ago

question 31

Essay

Platts Incorporated purchased 80% of Scarab Company several years ago when the fair value equaled the book value.On January 1,2010,Scarab has $100,000 of 8% bonds that were issued at face value and have five years to maturity.Interest is paid annually on December 31.Both Platts and Scarab would use the straight-line method to amortize any premium or discount incurred in the issuance or purchase of bonds.On January 1,2011,Platts purchased all of Scarab's bonds for $96,000.
Required:
1.Prepare the journal entries in 2011 that would be recorded by Platts and Scarab on their separate financial records.
2.Prepare the consolidating working paper entries required for the year ending December 31,2011.

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Definitions:

Hebephrenia

A type of schizophrenia characterized by disorganized behavior and speech, inappropriate or flat affect, and a lack of motivation or interest in life activities.

Surveillance Equipment

Devices used to monitor or record activities, often used for security or law enforcement purposes.

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False beliefs held with strong conviction despite superior evidence to the contrary, often occurring as symptoms of psychiatric disorders.

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