Mainstream Corporation holds 80 percent of the voting shares of Offenberg Company, acquired on January 1, 20X1, at underlying book value. On January 1, 20X4, Mainstream purchased Offenberg Company bonds with a par value of \(\$ 40,000\). The bonds pay 10 percent interest annually on December 31 and mature on December 31,20X8. Mainstream uses the basic equity method in accounting for its ownership in Offenberg Company. Partial balance sheet data for the two companies on December \(31,20 \mathrm{X} 5\), are as follows:

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a. Compute the gain or loss on bond retirement reported in the \(20 \mathrm{X} 4\) consolidated income statement.

b. Prepare the eliminating entry needed to remove the effects of the intercorporate bond ownership in completing the consolidation workpaper for 20X5.

c. What balance should be reported as consolidated retained earnings on December 31, 20X5 ?

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Mainstream Corporation Offenberg Company Investment in Offenberg Company Stock Investment in Offenberg Company Bonds Interest Income Bonds Payable Bond Premium $120,000 42.400 3.200 $100.000 11.250 Interest Expense 6.250 Common Stock 300,000 100.000 Retained Earnings, December 31, 20X5 500,000 50,000