Question
Saturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1, 20X3, which Star Corporation purchased. Pluto Corporation owns 65% of Saturn's voting
Saturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1, 20X3, which Star Corporation purchased. Pluto Corporation owns 65% of Saturn's voting shares. On Jan 1, 20X7, Pluto Corporation purchased $120,000 face value of Saturn bonds from Star for $118,020. On the date Pluto purchased the bonds, the bonds' carrying value on Saturn's book was $126,019. The bonds pay 12 percent interest annually on December 31. The preparation of consolidated financial statements for Saturn and Pluto at December 31, 20X9, required the following consolidating entry: Based on the information given above, what amount of gain or loss on bond retirement is included in the 20X7 consolidated income statement? $8,000 gain $5,200 gain $8,000 loss $5,200 loss
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