Potter Corporation owns 60 percent of Snape Company's voting shares. On January 1, 20X4, Snape sold bonds with a par value of $400,000 when the market rate was 6 percent. Potter purchased one-third of the bonds; the remainder was sold to nonaffiliates. The bonds mature in 15 years and pay an annual interest rate of 5 percent. Interest is paid semiannually on June 30 and December 31.