7 - 13 E Computations and entries ( constructive gain on purchase of parent bonds ) Pop Corporation acquired an 80 percent interest in Son Corporation at book value equal to fair value on January 1 , 2017 at which time Son's capital stock and retained earnings were $ 200,000 and $ 80,000 , respectively . On January 2 , 2018 , Son purchased $ 100,000 par of Pop's 8 percent , $ 200,000 par bonds for $ 97,600 three years before maturity . Interest payment dates are January 1 and July 1. During 2018 , Son reports interest income of $ 8,800 from the bonds , and Pop reports interest expense of . \$16,00

ADDITIONAL INFORMATION 1. Pop's separate income for 2018 is $ 400,000 . 2. Son's net income for 2018 is $ 100,000 . 3. Pop accounts for its investment using the equity method . 4. Straight - line amortization is applicable .

REQUIRED

1. Determine the gain or loss on the bonds .

2. Prepare the journal entries for Son to account for its bond investment during 2018 .

3. Prepare the journal entries for Pop to account for its bonds payable during 2018 .

4. Prepare the journal entry for Pop to account for its 80 percent investment in Son for 2018 . 5. Calculate noncontrolling interest share and consolidated net income for 2018 .