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Parrot Corporation holds 80% of the voting shares of Sparrow Company. On January 1, Year 3. Sparrow purchased $100,000 par value 12% first mortgage bonds

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Parrot Corporation holds 80% of the voting shares of Sparrow Company. On January 1, Year 3. Sparrow purchased $100,000 par value 12% first mortgage bonds of Parrot from Nighthawk for $115.000. Parrot originally issued the bonds to Nighthawk on January 1, Year I, for $110,000. The bonds have an 8-year maturity from the date of issue. Sparrow reported net income of $65.000 for Year 3, and Parrot reported income (excluding income from ownership of Sparrow's stock) of $90,000. What amount of consolidated net income should be reported for Year 3? b. $161.250 c. $146,250 d. $148,750 a. $163.750 A loss on the constructive retirement of a parent's bonds by a subsidiary is effectively (but not actually) recognized in the accounting records of the parent and its subsidiary a. at the date of constructive retirement. b. over the remaining term of the bonds. c. both a and b. d. Neither a nor b. 55. Which of the following suggestions would you give to a company considering the purchase of a subsidiary? a. Always make sure the company you buy has a name that starts with an "S." a. Save money on accountants - never have any intercompany transactions. a. Always buy 100% of the subsidiary's stock. a. Never buy a subsidiary, so you don't have to remember any of the consolidation rules

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