On January 1 2009 Pace Corporation issued 500 000 par

value #6373
On January 1, 2009, Pace Corporation issued $500,000 par value, 10-year, 15% bonds.
Interest is payable each June 30 and December 31. On January 1, 2012, Supra Corporation, a
90%-owned subsidiary, purchased on the open market all of the parent company bonds. Both
companies have a December 31 year-end. For this problem, assume the following four
independent cases.Required:A. For cases 1 and 2, compute the total constructive gain or loss
and the portion allocated to each company.B. For cases 1 and 2 prepare the journal entry or
entries to be made by Pace Corporation and Supra Corporation on June 30, 2012. Both
companies amortize discounts and premiums each interest payment date and use the straight-
line method of amortization. Assume that Pace uses the partial equity method to account for its
investment in Supra.C. Complete the following schedules as of December 31, 2012, after the
December 31 interest payment (receipt) and amortization of discount or premium have been
recorded.D. For cases 1 and 2, prepare in general journal form the intercompany bond
elimination entries required in the December 31, 2012, consolidated statements work
paper.View Solution:
On January 1 2009 Pace Corporation issued 500 000 par value

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