BB owns 80 percent of PC’s voting shares. On January 1, 2020, BB sold $120,000 par value 6 percent first mortgage bonds to PC for $150,000. The bonds mature
in 10 years and pay interest semiannually on January 1 and July 1.
Required:
a. Prepare the journal entries for 2015 for PC related to its ownership of BB’s
bonds.
b. Prepare the journal entries for 2015 for BB related to the bonds.
c. Prepare the work-paper eliminating entries needed on December 31, 2020 to
remove the effects of the inter-corporate ownership of bonds.