A parent company has bonds outstanding that were originally issued at a premium. At the beginning of the current year, a subsidiary purchased all of the parents bonds on the open market at a discount. Which of the following statements is true?

Multiple Choice

• The interest income and expense will agree in amount and should be offset when the consolidated income statement is prepared.

• Whether the balances agree or not, the bond interest income and expense should be reported in the consolidated income statement.

• In computing net income attributable to non-controlling interest, the interest expense should be included but the interest income should not.

• Whether the balances agree or not, the bond interest income and expense should be eliminated when preparing the consolidated income statement.