USA Intercompany bonds

Nov 22, 2022
Reaction score
United States
I am struggling with this advanced accounting problem. I took intermediate 8 years ago (finally finishing up my last 9 hours to sit for the exam) and I just can't remember how to do bonds. I got behind the 8 ball working 2 jobs and I was hoping someone could help me to understand this problem:

Preemptive Co. owns 80% of Strike Co. common voting shares (both are ‘public companies’). On 1/1/A, S issues $100,000 of 10-year 4% bonds, issued to yield 3%; the bond date is 1/1/A (thus coupon payments occur each 12/31). P purchases 80 of the bonds on 12/31/E to provide S with some sympathetic relief; the other bondholders, a particularly surly lot, refuse to sell. Assume that the market interest rate has skyrocketed due to Fed intervention, permitting P to buy the 80 bonds at the bargain price of $67,223.33. For credit, you must provide the following:

Amortization table for the interfirm bonds from the point of view of S Co. from 12/31/E to maturity

amortization table for the interfirm bonds from the point of view of P Co. from 12/31/E to maturity (I know I need to figure out the market rate to do this, but I am struggling to remember how to calculate it, I don't have a financial calculator, so I am using online tools.)

Gain/Loss on the consolidated income statement

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Members online

No members online now.

Forum statistics

Latest member

Latest Threads