Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two companies report the following balances for

Question:

Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two companies report the following balances for the year ending December 31, 2013:

__________________________________________Highlight _____________Kiort

Revenues and interest income. . . . . . . . . . . . . . . . $(670,000) .................$(390,000)

Operating and interest expense . . . . . . . . . . . . . . . . . 540,000 ................. 221,000

Other gains and losses . . . . . . . . . . . . . . . . . . . . . . . (120,000) ................. (32,000)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(250,000) ................. $(201,000)

On January 1, 2013, Highlight acquired on the open market bonds for $108,000 originally issued by Kiort. This investment had an effective rate of 8 percent. The bonds had a face value of $100,000 and a cash interest rate of 9 percent. At the date of acquisition, these bonds were shown as liabilities by Kiort with a book value of $84,000 (based on an effective rate of 11 percent). Determine the balances that should appear on a consolidated income statement for 2013.

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