Purse Corporation owns 70 percent of Scarf Company's voting shares. On January 1, 20X3, Scarf sold bonds with a par value of $600,000 at 98. Purse purchased $400,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in five years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1 Required: a. What amount of interest expense should be reported in the 20X4 consolidated income statement? (Do not round your intermediate calculations. Round your final answer to nearest whole dollar.) Answer is complete but not entirely correct. Interest expense $ 16,000 b. Prepare the journal entries Purse recorded during 20×4 with regard to its investment in Scarf bonds. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollar.) Answer is not complete. Date General Journal Debit Credit No 32,000 January 1, 20X4 1 Cash 32,000 Interest receivable Cash 2 July 1, 20X4 Investment in Scarf Company bonds Interest income December 31, 20X Accounts receivable 3 Investment in Scarf Company bonds Interest income c. Prepare all worksheet consolidation entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 20×4. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field. Do not round your intermediate calculations. Round your final answers to nearest whole dollear.) Answer is not complete. No Event Accounts Debit Credit
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