Cartwright inc has $1,000,000 of 10% bonds outstanding on December 31, 20x8. On January 1, 20x9 adams corp and 80% owned subsidiary of Cartright, inc purchases a $250,000 part of cartwrights inc's outstanding bonds in the market for $245,000. Interest accured by 12/31/20x9 is $12,500.

Determine the eliminating entries necessary for the 20x9 consolidated financial statements

To determine the eliminating entries necessary for the 20x9 consolidated financial statements, we need to consider the following transactions:

1. Adams Corp's purchase of Cartwright Inc's bonds in the market:
- Adams Corp purchases $250,000 part of Cartwright Inc's outstanding bonds for $245,000.
- The difference between the purchase price and the face value of the bonds, i.e., $5,000 ($250,000 - $245,000), will be treated as a gain or loss on the purchase.

2. Interest accrued on the bonds by 12/31/20x9:
- The interest accrued on the bonds by December 31, 20x9, is $12,500.
- This amount needs to be eliminated as intra-group interest expense as it represents interest accrued within the group.

Now let's break down the eliminating entries separately:

Eliminating Entry 1: Eliminate the intercompany bond purchase
- Debit: Investment in Bonds - Adams Corp ($250,000)
- Credit: Bonds Payable - Cartwright Inc ($250,000)

Eliminating Entry 2: Eliminate the gain or loss on bond purchase
- Debit: Gain or Loss on Bond Purchase ($5,000)
- Credit: Investment in Bonds - Adams Corp ($5,000)

Eliminating Entry 3: Eliminate intra-group interest expense
- Debit: Interest Expense ($12,500)
- Credit: Interest Income - Adams Corp ($12,500)

Note: These eliminating entries ensure that the consolidated financial statements reflect the elimination of intercompany transactions, and only the external transactions are included in the consolidated financial statements. These entries would be made during the consolidation process.