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mClassics Company paid $275,000 on May 1 to purchase $300,000, 6%, bonds that will mature in 5 years from the date of purchase. Interest on the bonds is paid May 1 and November 1 of each year. Classics Company plans to hold the bonds until maturity and amortizes the premium or discount on each interest payment date using the straight-line method. At year end, the bonds had a market value of $285,000. Prepare all necessary journal entries related to the investment in bonds. Answer: May 1 Long-Term Investment in Bonds 275,000 Cash 275,000 Nov. 1 Cash 9,000 Interest Revenue ($300,000 × 6% × 6/12) 9,000 Nov. 1 Long-Term Investment in Bonds 2,500 Interest Revenue ($300,000 - $275,000) × (6/60) 2,500 Dec 31 Interest Receivable 3,000 Interest Revenue ($300,000 × 6% × 2/12) 3,000 Dec. 31 Long-Term Investment in Bonds 833 Interest Revenue ($300,000 - $275,000) × (2/60) 833

On April 2, Smith Co. purchased 25% of Wesson Inc.’s stock for $600,000. On August 1, Wesson paid a cash dividend of $340,000 and on August 31 reported net income for the year of $2,000,000. On October 1, Smith sold all the stock in Wesson Inc. for $1,200,000.
Record the Wesson-related transactions in the journal of Smith Co.
Answer:
April 2 Long-Term Investment in Wesson $600,000 Cash $600,000
August 1 Cash ($340,000 X .25) $85,000 Long-Term Investment in Wesson $85,000
August 31 Long-Term Investment in Wesson ($2,000,000 X .25) $500,000 Investment Revenue $500,000
October 1 Cash $1,200,000 Long-Term Investment in Wesson $1,015,000 Gain on Sale of Investment ($1,200,000 - $1,050,000) $185,000

Compute the total amount to be reported on the consolidated balance sheet of Parent, Inc. The first item is completed as an

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