Granite Company issued $200,000 of 10 percent first mortgage bonds on January 1, 20X4, at 105. The bonds mature in 10 years and pay interest semiannually on January 1 and July 1. Mortar Corporation purchased $140,000 of Granite's bonds from the original purchaser on December 31, 20X8, for $125,000. Mortar owns 75 percent of Granite's voting common stock.

1.Based on the information given above, which of the following best describes the intercompany transfer of debt?

2. Based on the information given above, what amount of premium on bonds payable will be eliminated in the preparation of the 20X8 consolidated financial statements? $3,500

3. Based on the information given above, what is the balance of the net intercompany bond liability at December 31, 20X8? 143,500

4. Based on the information given above, what is the balance of the bond investment at December 31, 20X8?

5. Based on the information given above, what amount of gain or loss on bond retirement will be reported in the 20X8 consolidated financial statements? 18,500 gain

6. Based on the information given above, what amount of premium on bonds payable will be eliminated in the preparation of the 20X9 consolidated financial statements?

7. Based on the information given above, what amount of interest income will be eliminated in the preparation of the 20X9 consolidated financial statements? 17,000

8. Based on the information given above, what amount of interest expense will be eliminated in the preparation of the 20X9 consolidated financial statements? 13,300

9. Based on the information given above, what is the TOTAL amount of the intercompany interest income/expense adjustment? Decrease income 3,700

10. Based on the information given above, what amount of constructive gain will be allocated to noncontrolling interest in 20X8 consolidated financial statements? 4,625

11. Based on the information given above, was the intercompany transfer of debt a direct or an indirect transfer? Indirect