Problem 6-28 [LO2] Several years ago Abrams, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be paid on this debt. The bonds were issued at a discoun

Problem 6-28 [LO2]

Several years ago Abrams, Inc., sold $900,000 in bonds to the public. Annual cash interest of 9 percent ($81,000) was to be paid on this debt. The bonds were issued at a discount to yield 12 percent. At the beginning of 2012, Bierman Corporation (a wholly owned subsidiary of Abrams) purchased $180,000 of these bonds on the open market for $201,000, a price based on an effective interest rate of 7 percent. The bond liability had a book value on that date of $760,000. Assume Abrams uses the equity method to account internally for its investment in Bierman.

a. What consolidation entry would be required for these bonds on December 31, 2012? (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Event General Journal Debit Credit

Entry B (Click to select)Interest ExpenseNote PayableBonds PayableInvestment in BondsInterest IncomeLoss on Retirement of DebtAmortization ExpenseInvestment in Bierman

(Click to select)Amortization ExpenseNote PayableInterest ExpenseBonds PayableInvestment in BondsLoss on Retirement of DebtInvestment in BiermanInterest Income

(Click to select)Investment in BondsInterest ExpenseBonds PayableNote PayableInterest IncomeAmortization ExpenseLoss on Retirement of DebtInvestment in Bierman

(Click to select)Interest ExpenseInvestment in BiermanLoss on Retirement of DebtInvestment in BondsInterest IncomeAmortization ExpenseNote PayableBonds Payable

(Click to select)Investment in BiermanNote PayableInterest IncomeInterest ExpenseBonds PayableLoss on Retirement of DebtInvestment in BondsAmortization Expense

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b. What consolidation entry would be required for these bonds on December 31, 2014? (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Event General Journal Debit Credit

Entry *B (Click to select)Interest ExpenseNote PayableInvestment in BondsInterest IncomeInvestment in BiermanBonds PayableAmortization ExpenseLoss on Retirement of Debt

(Click to select)Investment in BondsAmortization ExpenseBonds PayableInterest IncomeInterest ExpenseInvestment in BiermanNote PayableLoss on Retirement of Debt

(Click to select)Bonds PayableNote PayableAmortization ExpenseInterest ExpenseLoss on Retirement of DebtInterest IncomeInvestment in BondsInvestment in Bierman

(Click to select)Investment in BondsAmortization ExpenseInterest ExpenseInvestment in BiermanLoss on Retirement of DebtBonds PayableInterest IncomeNote Payable

(Click to select)Amortization ExpenseInterest IncomeInvestment in BondsLoss on Retirement of DebtInvestment in BiermanBonds PayableInterest ExpenseNote Payable

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