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Darcy Company is an 80%-owned subsidiary of Kraco Industries. Darcy Company issued 10-year, 8% bonds in the amount of $1,000,000 on January 1, 2015. The

Darcy Company is an 80%-owned subsidiary of Kraco Industries. Darcy Company issued 10-year, 8% bonds in the amount of $1,000,000 on January 1, 2015. The bonds were issued at face value, and interest is payable each January 1. On January, 1, 2017, Kraco Industries purchased all of the Darcy bonds for $975,000. Kraco will amortize the discount on a straight-line basis. For the years ending (a) December 31, 2017, and (b) December 31, 2018, determine the effects of this transaction:

1. On consolidated net income.

2. On the distribution of income to the controlling and noncontrolling interests

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