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kati45 [8]
2 years ago
7

Saturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1, 20X3, which Star Corporation purchased. Pluto Co

rporation owns 65% of Saturn's voting shares. On Jan 1, 20X7, Pluto Corporation purchased $120,000 face value of Saturn bonds from Star for $118,020. On the date Pluto purchased the bonds, the bonds' carrying value on Saturn's book was $126,019. The bonds pay 12 percent interest annually on December 31. The preparation of consolidated financial statements for Saturn and Pluto at December 31, 20X9, required the following consolidating entry:
Based on the information given above, what amount of gain or loss on bond retirement is included in the 20X7 consolidated income statement?
a. $8,000 gain
b. $5,200 gain
c. $8,000 loss
d. $5,200 loss
Business
1 answer:
taurus [48]2 years ago
8 0

Answer:

a. $8,000 gain

Explanation:

The face value of the bonds purchased by Pluto Corporation are $120,000. The bonds are purchased at discount of $1,980.  The bonds have carrying value of $126,019 at the time of purchase. The net gain or loss is calculated by the difference between two values.

$120,000 - $126,019 - $6,019

The discount amount of the bond was $1,980.

Total gain on the bonds approximately ($6,019 + $1,980) = $8,000

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Georgie is taking a chemistry class, where different liquids must be combined in specific amounts in order to produce an end pro
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<h2 />

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