Question
On January 1, 20X4, Passive Heating Corporation paid $104,000 for $100,000 par value, 9 percent bonds of Solar Energy Corporation. Solar had issued $300,000 of
On January 1, 20X4, Passive Heating Corporation paid $104,000 for $100,000 par value, 9 percent bonds of Solar Energy Corporation. Solar had issued $300,000 of the 10-year bonds on January 1, 20X2, for $360,000. The bonds pay interest semiannually. Passive previously had purchased 80 percent of the common stock of Solar on January 1, 20X1, at underlying book value.
Passive reported operating income (excluding income from subsidiary) of $50,000, and Solar reported net income of $30,000 for 20X4.
The company uses straight-line amortization.
Required
Select the correct answer for each of the following questions.
-
What amount of interest expense should be included in the 20X4 consolidated income statement?
-
$14,000
-
$18,000
-
$21,000
-
$27,000
-
-
What amount of gain or loss on bond retirement should be included in the 20X4 consolidated income statement?
-
$4,000 gain
-
$4,000 loss
-
$12,000 gain
-
$16,000 loss
-
-
Income assigned to the noncontrolling interest in the 20X4 consolidated income statement should be
-
$6,000.
-
$8,100.
-
$8,400.
-
$16,000.
-
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started