Use the following information to answer the question(s)below.
Pascalian Company owns a 90% interest in Sapp Company.On January 1,2010,Pascalian had $300,000,6% bonds outstanding with an unamortized premium of $9,000.The bonds mature on December 31,2014.Sapp acquired one-third of Pascalian's bonds in the open market for $97,000 on January 1,2010.Both companies use straight-line amortization of bond discounts/premiums.Interest is paid on December 31.On December 31,2010,the books of the two affiliates held the following balances:

-The gain from the bond purchase that appeared on the December 31,2010 consolidated income statement was

Question

Use the following information to answer the question(s)below.
Pascalian Company owns a 90% interest in Sapp Company.On January 1,2010,Pascalian had $300,000,6% bonds outstanding with an unamortized premium of $9,000.The bonds mature on December 31,2014.Sapp acquired one-third of Pascalian's bonds in the open market for $97,000 on January 1,2010.Both companies use straight-line amortization of bond discounts/premiums.Interest is paid on December 31.On December 31,2010,the books of the two affiliates held the following balances:
 
-The gain from the bond purchase that appeared on the December 31,2010 consolidated income statement was

Quizplus · Accepted Answer

D)
Book value of Pascalian's bonds
acquired by Sapp equals 1/3
times ($300,000 + $9,000)$103,000
Less: Cost of acquiring
Pascalian bonds ( 97,000)
Constructive gain on bonds $ 6,000

Use the Following Information to Answer the Question(s)below