Retirement of Bonds Sold at a Discount (Effective Interest Method) Farley Corporation owns 70

Retirement of Bonds Sold at a Discount (Effective Interest Method)

Farley Corporation owns 70 percent of Snowball Enterprises’ stock. On January 1, 20X1, Farley sold $1,000,000 par value, 7 percent (paid semiannually), 20-year, first mortgage bonds to Kling Corporation at 97. On January 1, 20X8, Snowball purchased $300,000 par value of the Farley bonds directly from Kling for $296,880.

Required

Prepare the elimination entry needed at December 31, 20X8, to remove the effects of the intercorporate bond ownership in preparing consolidated financial statements.