Fargus Corporation Owned 51% of the Voting Common Stock of Sanatee

question 108

Essay

Fargus Corporation owned 51% of the voting common stock of Sanatee, Inc. The parent's interest was acquired several years ago on the date that the subsidiary was formed. Consequently, no goodwill or other allocation was recorded in connection with the acquisition price.
On January 1, 2010, Sanatee sold $1,400,000 in ten-year bonds to the public at 108. The bonds pay a 10% interest rate every December 31. Fargus acquired 40% of these bonds on January 1, 2012, for 95% of the face value. Both companies utilized the straight-line method of amortization.
What balances would need to be considered in order to prepare the consolidation entry in connection with these intra-entity bonds at December 31, 2012, the end of the first year of the intra-entity investment? Prepare schedules to show numerical answers for balances that would be needed for the entry.

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Definitions:

Phobias

Intense, irrational fears of specific objects, situations, or activities that lead to avoidance behavior.

Unconditioned

Refers to stimuli or responses that occur naturally without any prior learning or conditioning.

Specific Stimulus

A distinct environmental cue that elicits a particular response from an organism.

Specific Response

A particular reaction or behavior elicited by a specific stimulus or situation.