Pare Corporation owns 65% of the outstanding voting stock of Summer Corporation.On January 1,2013,Pare purchased $4,000,000 of bonds that were originally issued by Summer several years earlier.The ten-year bonds have a 5% interest rate,and pay interest each December 31.
The bonds were originally issued at a discount of $206,080,but at January 1,2013,they have a book value of $3,896,960.Pare paid $4,067,935 for the bonds and will amortize the premium over the next five years when the bonds mature.Both companies use the straight-method of amortization.
Required:
1.Calculate the interest expense for 2013 that will be recorded by Summer.
2.Calculate the interest income for 2013 that will be recorded by Pare.
3.Calculate the Gain/Loss on retirement of bonds payable that will be reported on the consolidated financial statements for the year ending December 31,2013.

Question

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The Answer of Pare Corporation owns 65% of the outstanding voting stock of Summer Corporation.On January 1,2013,Pare purchased $4,000,000 of bonds that were originally issued by Summer several years earlier.The ten-year bonds have a 5% interest rate,and pay interest each December 31.
The bonds were originally issued at a discount of $206,080,but at January 1,2013,they have a book value of $3,896,960.Pare paid $4,067,935 for the bonds and will amortize the premium over the next five years when the bonds mature.Both companies use the straight-method of amortization.
Required:
1.Calculate the interest expense for 2013 that will be recorded by Summer.
2.Calculate the interest income for 2013 that will be recorded by Pare.
3.Calculate the Gain/Loss on retirement of bonds payable that will be reported on the consolidated financial statements for the year ending December 31,2013.

Pare Corporation Owns 65% of the Outstanding Voting Stock of Summer