Sundown company issued $500,000 of 6% first mortgage bonds on January 1, 2013 for $413,540, when the market rate was 8%. the bonds mature in 15 years and pay interest semiannually on January 1 and July 1. Predawn Corporation purchased $200,000 of Sundowns bonds from the original purchaser on December 31, 2015, for $183942, when the market rate was 7%. Predawn owns 60% of Sundowns voting common stock.
1. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 2015.
2. Prepare the worksheet consolidation entry or entries needed to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements for 2016.