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

question 110

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.

---

Definitions:

Positive Relationship

An interaction between individuals characterized by mutual respect, cooperation, support, and the absence of conflict or negativity.

Identification

The process of associating oneself with particular groups, ideas, or qualities, leading to a sense of belonging or affinity.

Informal Systems

Unofficial, non-structured methods through which information is shared and activities are conducted within an organization, contrasting with formal policies and procedures.

Everyday Activities

Routine actions or tasks that are performed on a daily basis as part of normal life.