Company P owns 80% of Company S. On January 1, 20X3, Company S has outstanding 6

Question

Company P owns 80% of Company S. On January 1, 20X3, Company S has outstanding 6% bonds with a face value of $200,000 and an unamortized discount of $3,000, which is being amortized on a straight-line basis over a remaining term of 10 years. On January 1, 20X3, Company P purchased all the bonds for $205,000. The premium also is amortized on a straight-line basis. The net impact of the purchase on the noncontrolling interest as of December 31, 20X3, is ____.

a. $(8,000)

b. $(1,600)

c. $(1,440)

d. $(1,200)

PLEASE PROVIDE YOUR CALCULATION WITH YOUR ANSWER.

Explanation / Answer

COmpay S: Bond FV = $200,000, UnAMortized Disc is 3000.

SO Total Bond Value is 203,000 in Books

When P buys Bonds for 205,000, It pays a Premium of 205000-203000 = 2000.

As it owns 80% of S, Its share of Non controllable Int is 80%*2000 = 1600.

So Ans is B. $(1600).

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.