1) Separate company and consolidated income statements for Pitta and Sojourn Corporations for the year ended December 31, 2013 are summarized as follows:

Pitta Soujourn Consolidated

Sales Revenue $ 500,000 $ 100,000 $ 600,000

Income from Sojourn 19,900

Bond interest income 6,000

Gain on bond retirement 3,000

Total revenues 519,900 106,000 603,000

Cost of sales $ 280,000 $ 50,000 $ 330,000

Bond interest expense 9,000 3,600

Other expenses 120,900 31,000 151,900

Total expenses 409,900 81,000 485,500

Consolidated net income 117,500

Noncontrolling interest share 7,500

Separate net income and

Control. interest share in

consolidated net income $ 110,000 $ 25,000 $ 110,000

The interest income and expense eliminations relate to a $100,000, 9% bond issue that was issued at par value and matures on January 1, 2018. On January 2, 2013, a portion of the bonds was purchased and constructively retired.

Required: Answer the following questions.

1. Which company is the issuing affiliate of the bonds payable?

2. What is the gain or loss from the constructive retirement of the bonds payable that is reported on the consolidated income statement for 2013?

3. What portion of the bonds payable is held by nonaffiliates at December 31, 2013?

4. Is Sojourn a wholly-owned subsidiary? If not, what percentage does Pitta own?

5. Does the purchasing affiliate use straight-line or effective interest amortization?

6. Explain the calculation of Pitta's $19,900 income from Sojourn.