On 1/1/A, Perpetrator Inc. buys 80% of Suspect Co. for $80k; S fmv = nbv = $75k CS, $25k RE (no differential). In years A, B, C, and D, P and S have Net Income / dividends of $60k/20k + 20k/5k, 80k/20k + 30k/10k, 100k/20k + 40k/10k, and 120k/20k + 50k/10k. On 1/1/A S issues $20k of 4-year 12% bonds to yield 10%; the bond date is 1/1/A (thus coupon payments occur each 12/31). P purchases 10 of the bonds on 1/1/B for $11,030.84.

A. Provide an amortization table for the 10 repurchased bonds from the point of view of S Co. from 1/1/B onward. You must use the interest method of amortization.

B. Provide an amortization table for the 10 bonds from the point of view of P Co. from 1/1/B onward. You must use the interest method of amortization and the table format I used in class. Hint: you must determine the market rate of interest on the repurchase date first.

C. Calculate the Gain/Loss on Constructive Retirement; show that it is the difference between Ss 1/1/B Bond net book value and Ps 1/1/B repurchase price. These should be the first 2 numbers in your amortization tables. This amount is: ____________

D. Total interest expense for the years following the repurchase (just total the interest column in Ss amortization table) is: ____________

E. Total interest revenue for the years following the repurchase (just total the interest column in Ps amortization table) is: ____________

F. Provide Ps 12/31/C workpaper entry to eliminate the intercompany bond accounts.