Saturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1,20X3,which Star Corporation purchased.On July 1,20X7,Pluto Corporation purchased $120,000 face value of Saturn bonds from Star.The bonds pay 12 percent interest annually on December 31.The preparation of consolidated financial statements for Saturn and Pluto at December 31,20X9,required the following consolidation entry:

-Based on the information given above,what amount of gain or loss on bond retirement is included in the 20X7 consolidated income statement?
A)$6,600
B)$4,800
C)$6,000
D)$5,400

Question

Saturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1,20X3,which Star Corporation purchased.On July 1,20X7,Pluto Corporation purchased $120,000 face value of Saturn bonds from Star.The bonds pay 12 percent interest annually on December 31.The preparation of consolidated financial statements for Saturn and Pluto at December 31,20X9,required the following consolidation entry:
 
-Based on the information given above,what amount of gain or loss on bond retirement is included in the 20X7 consolidated income statement?
A)$6,600 
B)$4,800 
C)$6,000 
D)$5,400

Quizplus · Accepted Answer

The gain or loss on bond retirement is calculated as the difference between the carrying amount of the bonds and the amount paid to retire them. The correct choice is $6,600, which represents this difference.

Saturn Corporation Issued $300,000 Par Value 10-Year Bonds at 107