Light Corporation owns 80 percent of Sound Company's voting shares. On January 1, 20X7, Sound sold bonds with a par value of $300,000 at 95. Light purchased two thirds of the bonds; the remainder was sold to nonaffiliates. The bonds mature in ten years and pay an annual interest rate of 6 percent. Interest is paid semiannually on January 1 and July 1.
Based on the information given above, what amount of interest expense should be reported in the 20X8 consolidated income statement?
A) $6,000
B) $6,500
C) $5,000
D) $10,000

Question

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The Answer of Light Corporation owns 80 percent of Sound Company's voting shares. On January 1, 20X7, Sound sold bonds with a par value of $300,000 at 95. Light purchased two thirds of the bonds; the remainder was sold to nonaffiliates. The bonds mature in ten years and pay an annual interest rate of 6 percent. Interest is paid semiannually on January 1 and July 1.
Based on the information given above, what amount of interest expense should be reported in the 20X8 consolidated income statement?
A) $6,000
B) $6,500
C) $5,000
D) $10,000

Light Corporation Owns 80 Percent of Sound Company's Voting Shares