Pepper Enterprises owns $95$ percent of Salt Corporation. On January $1,20$X$1,$ Salt issued $$200,000$ of five$-$year bonds at $115.$ Annual

interest of $12$ percent is paid semiannually on January $1$ and July $1.$ Pepper purchased $$100,000$ of the bonds on August $31,203,$ at

par value. The following balances are taken from the separate $203$ financial statements of the two companies:

Note: Assume using straight$-$line amortization of bond discount or premium.

Required:

a$.$ Compute the amount of interest expense that should be reported in the consolidated income statement for $203.$

b$.$ Compute the gain or loss on constructive bond retirement that should be reported in the $20$X$3$ consolidated income statement.

c$.$ Prepare the consolidation worksheet consolidation entry or entries as of December $31,203,$ to remove the effects of the

intercorporate bond ownership.

Complete this question by entering your answers in the tabs below.

Prepare the consolidation worksheet consolidation entry or entries as of December $31,20$X$3,$ to remove the effects of the intercorporate

bond ownership.

Note: If no entry is required for a transaction$/$event$,$ select $"$No journal entry required" in the first account field.

A Record the entry to eliminate the effects of the

intercompany ownership in bonds for $203.$

B Record the entry to eliminate intercompany interest

receivables or payables for $203.$