E8-3A Bond Sale at Discount (Straight-line Method) LO 8-2 Purse Corporation owns 70 percent of Scarf Company's voting shares On January 1, 20x3, Scarf sold bonds with a par value of $600,000 at 98. Purse purchased $400,000 par value of the bonds, the remainder was sold to nonaffiliates. The bonds mature in five years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1. Note: Assume using straight- line amortization of bond discount or premium Required: a. What amount of interest expense should be reported in the 20X4 consolidated income statement? Answer is complete and correct. Interest expense $ 16,800 b. Prepare the journal entres Purse recorded during 20X4 with regard to its investment in Scarf bonds. (If no entry is required for a transaction/event, select "No Journal entry required" In the first account field. Do not round your Intermediate calculations. Round your final answers to nearest whole dollar.) Answer is complete and correct. No 1 Date: January 1, 20X4 Cash Interest receivable General Journal Debit Credit 16,000 16,000 2 July 1, 2004 Cash Investment in Scarf Company bonds Interest income 000 16,000 300 16,800 3 December 31, 20x Interest receivable Investment in Scarf Company bonds Interest income 000 16,000 300 16,000