Question 9 5 points p Corporation owns 90% of the outstandng common stock of S C

Question

Question 9 5 points p Corporation owns 90% of the outstandng common stock of S Company. OnJanuary 1. 2014 s company issued SS0000 . 12-teo-year bonds. 2016.P Corporaton paid $416,00 or s ompany bonds with a par value of $40000 and a carryng value of $395,600 Both companies use the straight-Ine method to amortize bond premiums and discounts.P Corporation accounts for the investment using the cost method of accounting The total gain or loss on the constructive retirement of the debt to be reported in the 2016 consolidated income statement is OA $20.400 loss 8.518,400 gain. C. S20.400 gain. D.518.400 loss

Explanation / Answer

1 Purchase Price 416000 Less : Carrying value of bond -395600 Loss on constructive retirement 20400 The loss of $20400 will be reported in the 2016 consolidated income statement Option A is correct 2 P corporation Purchase Price of Bond 416000 Less : Amortization of premium paid -2000 (416000-400000)/8 Balance in the investment 414000 P corporation would report balance of $414000 Option A is correct

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