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Several years ago, Soriano Corporation sold bonds with a face value of $1,000,000 to the...

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Accounting

Several years ago, Soriano Corporation sold bonds with a face value of $1,000,000 to the public at a premium. Annual cash interest of 8 percent (i.e., $80,000) was to be paid on this debt. On January 1, 2019, Padino Inc., the parent company of Soriano Corporation, purchased these bonds on the open market for $940,000. (Hint: Did Padino purchase the bonds at a discount or a premium?) On that date, the bonds had 10 years until maturity and Soriano reported the book value of Bonds Payable of $1,045,000. Assume Padino uses the equity method to internally account for its investment in Soriano. Both parties use the straight-line method of amortization.

Required:

Consider a different scenario as follows. On January 1, 2019, Padino purchased these bonds on the open market for $1,045,000 and the bonds were reported in as Bonds Payable with a book value of $940,000 in Sorianos book on the same date. In this scenario, Padino purchased the bonds at a premium and Soriano issued the bonds at a discount. Other information remains the same as that in the original problem.

(9 points) What consolidation entry would be required for these bonds on December 31, 2019?

(9 points) What consolidation entry would be required for these bonds on December 31, 2020?

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