Parent Company owns an 80% interest in Subsidiary Company.Subsidiary Company has outstanding $200,000 of 8% bonds that were sold at face value and have 5 years to mature from the balance sheet date.Parent Company owns 75% of the bonds and has a remaining unamortized book value of $145,000.Subsidiary Company bonds will be presented on the consolidated balance sheet as
A)bonds payable, $55,000
B)bonds payable, $50,000
C)bonds payable, $ 5,000
D)bonds payable, $ 40,000

Question

Parent Company owns an 80% interest in Subsidiary Company.Subsidiary Company has outstanding $200,000 of 8% bonds that were sold at face value and have 5 years to mature from the balance sheet date.Parent Company owns 75% of the bonds and has a remaining unamortized book value of $145,000.Subsidiary Company bonds will be presented on the consolidated balance sheet as
A)​bonds payable, $55,000
B)​bonds payable, $50,000
C)​bonds payable, $ 5,000
D)​bonds payable, $ 40,000

Quizplus · Accepted Answer

Since the Parent Company owns 75% of the Subsidiary Company's bonds, these bonds are essentially an intercompany transaction and are eliminated in consolidation. The remaining 25% of the bonds, which are owned by external parties, should be reported on the consolidated balance sheet. The total value of the bonds is $200,000, so 25% of this amount is $50,000, which is the portion that will be reported as bonds payable on the consolidated balance sheet.

Parent Company Owns an 80% Interest in Subsidiary Company