Steinberger Company issued 10-year, 8% bonds with a par value of $1,000,000 on January 2, 2009, for $1,040,000. Interest is payable semiannually on June 30 and December 31. On December 31, 2010, Potts Company purchased $700,000 of Steinberger par value bonds for $670,000. Steinberger is an 80% owned subsidiary of Potts. Both companies use the straight-line method to amortize bond discounts and premiums. Steinberger declared cash dividends of $100,000 in 2010 and reported net income of $220,000 for the year.

Potts reported net income of $350,000 for 2010 and paid dividends of $160,000 during 2010.

Required:

A. Compute the total gain or loss on the constructive retirement of the debt.

B. Allocate the total gain or loss between Steinberger Company and Potts Company.

C. Compute the controlling interest in consolidated net income for 2010.

D. Prepare in general journal form the intercompany bond elimination entries for the consolidated statements workpaper prepared on December 31, 2010.