Keenan Company has had bonds payable of $20,000 outstanding for several years. On January 1, 2013, there was an unamortized premium of $2,000 with a remaining life of 10 years, Keenan's parent, Ross, Inc. purchased the bonds in the open market for $19,000. Keenan is a 90% owned subsidiary of Ross. The bonds pay 8% interest annually on December 31. The companies use the straight-line method to amortize interest revenue and expense. Compute the consolidated gain or loss on a consolidated income statement for 2013.
A) $3,000 gain.
B) $3,000 loss.
C) $1,000 gain.
D) $1,000 loss.
E) $2,000 gain.

Question

Quizplus · Accepted Answer

Bonds Purchase Price $19,000 - Bonds BV ($20,000 - $2,000) = $1,000 Gain to Consolidation Income

Keenan Company Has Had Bonds Payable of $20,000 Outstanding for Several