Problem:

Stang Corporation issued to Bradley Company $400,000 par value, 10-year bonds with a coupon rate of 12 percent on January 1, 20X5, at 105. The bonds pay interest semiannually on July 1 and January 1. On January 1, 20X8, Purple Corporation purchased $100,000 of the bonds from Bradley for $104,900. Purple owns 65 percent of the voting common shares of Stang and prepares consolidated financial statements.

Required:

Question 1: Prepare the worksheet elimination entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X8.

Question 2: Assuming that Stang reports net income of $20,000 for 20X8, compute the amount of income assigned to noncontrolling shareholders in the 20X8 consolidated income statement

Question 3: Prepare the worksheet elimination entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20X9.

Note: Please provide equation and explain comprehensively and give step by step solution.