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Assume that a Parent company owns 100% of its Subsidiary. On January 1, 2020 the Parent company had a $2,000,000 (face) bond payable outstanding with
Assume that a Parent company owns 100% of its Subsidiary. On January 1, 2020 the Parent company had a $2,000,000 (face) bond payable outstanding with a carrying value of $2,140,000. The bond was originally issued to an unaffiliated company. On that same date, the Subsidiary acquired the bond for $1,992,000. During 2020, the Parent company reported $1,260,000 of (pre-consolidation) income from its own operations (ie. prior to any equity method adjustments by the Parent company) and after recording interest expense. The Subsidiary reported $840,000 of (pre-consolidation) income from its own operations after recording interest income. Related to the bond during 2020, the parent reported interest expense of $220,000 while the subsidiary reported interest income of $190,000. Required: Determine the following amounts that will appear in the 2020 consolidated income statements. a. Interest income from bond investment b. Interest expense on bond payable C. Gain (loss) on constructive retirement of bond payable d. Consolidated net income
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