Smart Company issued $100,000 of 10 percent bonds on January 1, 20X1, at 120. The bonds mature in 10 years and pay 10 percent interest annually on December 31. Phone Corporation holds 80 percent of Smarts voting shares, acquired on January 1, 20X1, at underlying book value. On January 1, 20X4, Phone purchased Smart bonds with a par value of $40,000 from the original purchaser for $44,000. Phone uses the modified equity method in accounting for its ownership in Smart. Partial balance sheet data for the two companies on December 31, 20X5, are as follows:

		Phone Corporation		Smart Company
Investment in Smart Company Stock		$120,000
Investment in Smart Company Bonds		43,069
Interest Income		3,517
Bonds Payable				$100,000
Bond Premium				11,706
Interest Expense				8,105
Common Stock		300,000		100,000
Retained Earnings, December 31, 20X5		500,000		50,000

Required

Compute the gain or loss on bond retirement reported in the 20X4 consolidated income statement.

Prepare the consolidation entry needed to remove the effects of the intercorporate bond ownership in completing the consolidation worksheet for 20X5.

What balance should be reported as consolidated retained earnings on December 31, 20X5?