Advanced Accounting 10th Edition by Thomas Schaefer, Joe Ben Hoyle, Timothy Doupnik

Exercise 57

Able Company possesses 80 percent of Baker Company's outstanding voting stock.Able uses the partial equity method to account for this investment.On January 1, 2007, Able sold 9 percent bonds payable with a $10 million face value (maturing in 20 years) on the open market at a premium of $600,000.On January 1, 2010, Baker acquired 40 percent of these same bonds from an outside party at 96.6 of face value.Both companies use the straight-line method of amortization.For a 2011 consolidation, what adjustment should be made to Able's beginning Retained Earnings as a result of this bond acquisition
a.$320,000 increase.
b.$326,000 increase.
c.$331,000 increase.
d.$340,000 increase.