Parent Company paid a nonaffiliate \(\$ 95,000\) in \(20 \times 4\) to purchase bonds that are recorded as a liability of \(\$ 105,000\) on the books of Subsidiary Company. Parent Company owns 60 percent of the shares of Subsidiary Company stock. The bonds have five years remaining to maturity from the date of purchase by Parent Company. Subsidiary Company reports net income of \(\$ 40,000\) in 20X4 and \(\$ 60,000\) in 20X5. Parent Company reports income, excluding investment income from Subsidiary Company stock, of \(\$ 200,000\) in both \(20 \mathrm{X} 4\) and 20 X5 .

\section*{Required}

Select the correct answer for each of the following questions.

1. If the bond purchase occurred on December \(31,20 \times 4\), what amount of consolidated net income should be reported for \(20 \mathrm{X} 4\) ?

a. \(\$ 228,800\).

b. \(\$ 230,000\).

c. \(\$ 232,000\).

d. \(\$ 234,000\).

2. If the bond purchase occurred on January 1, 20X4. what amount of consolidated net income should be reported for \(20 \mathrm{X} 4\) ?

a. \(\$ 228,800\).

b. \(\$ 230,000\).

c. \(\$ 232,000\).

d. \(\$ 234,000\).

3. What amount of consolidated net income should be reported for \(20 \mathrm{X} 5\) if the bond purchase occurred on January 1, 20X4?

a. \(\$ 234,000\).

b. \(\$ 234,800\).

c. \(\$ 237,200\).

d. \(\$ 238.000\).

4. What amount of consolidated net income should be reported for \(20 \mathrm{X} 5\) if the bond purchase occurred on December 31, 20X4?

a. \(\$ 234,000\).

b. \(\$ 234,800\).

c. \(\$ 237,200\).

d. \(\$ 238,000\).

5. Suppose the bond liability had been recorded on the books of Parent Company and Subsidiary Company purchased the bonds under the conditions indicated. What amount of consolidated net income would be reported for \(20 \mathrm{X} 4\) if the purchase occurred on December \(31,20 \mathrm{X} 4\) ?

a. \(\$ 228,800\).

b. \(\$ 230,000\).

c. \(\$ 232,000\).

d. \(\$ 234,000\).

6. Suppose the bond liability had been recorded on the books of Parent Company and Subsidiary Company purchased the bonds under the conditions indicated. What amount of consolidated net income would be reported for 20X4 if the purchase occurred on January 1, 20X4?

a. \(\$ 228,800\).

b. \(\$ 230,000\).

c. \(\$ 232,000\).

d. \(\$ 234,000\).