ABC issued $500,000 of 4%, 10 year bonds on 1/1/2009 where the market rate was 5%.

XYZ owns 80% of ABC, and on 1/1/2011, purchased $100,000 of the bonds when the market rate was 3%.

1)Price the ABC bonds

2) Calculate the gain or loss on the XYZ purchase of the bonds (i.e. you must price the bonds when XYZ made the purchase)

3) Make consolidating entry *B at 12/31/2012