Puget Corporation owns 80 percent of Sound Company's voting shares. On January 1, 20X7, Sound sold bonds

with a par value of $300,000 when the market rate was 7 percent. Puget purchased two thirds of the bonds; the

remainder was sold to nonaffiliates. The bonds mature in ten years and pay an annual interest rate of 6 percent.

Interest is paid semiannually on June 30 and Dec 31.

8) Based on the information given above, what amount of interest expense should be reported in the

20X8 consolidated income statement?

A) $6,511 B) $0 C) $19,643 D) $6,548

9) Based on the information given above, what amount of interest income will Puget Corporation

recognize on December 31, 20X8 relative to the interest received on that day, in its separate

financial statements?

A) $6,557 B) $13,023 C) $6,538 D) $13,096

10) Based on the information given above, what amount of interest expense will be eliminated in the

preparation of the 20X8 consolidated financial statements?

A) $8,682 B) $8,730 C) $13,096 D) $13,023