Paleo Corporation holds 80% of the capital stock of Sockrite Company.On January 1,2013,Sockrite purchased $50,000 par value,10% bonds on the open market that had been issued by Paleo on January 1,2011.Sockrite paid $58,000 for these bonds which had originally been issued by Paleo for $53,000,with a 10-year maturity from the date of issue.Interest is paid annually on December 31.Straight-line amortization is used by both companies.
Required:
1.Calculate the interest income reported by Sockrite related to these bonds in 2013.
2.Calculate the interest expense reported by Paleo related to these bonds in 2013.
3.Calculate the gain or loss on retirement of bonds payable to be reported on consolidated financial statements in 2013.

Question

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The Answer of Paleo Corporation holds 80% of the capital stock of Sockrite Company.On January 1,2013,Sockrite purchased $50,000 par value,10% bonds on the open market that had been issued by Paleo on January 1,2011.Sockrite paid $58,000 for these bonds which had originally been issued by Paleo for $53,000,with a 10-year maturity from the date of issue.Interest is paid annually on December 31.Straight-line amortization is used by both companies.
Required:
1.Calculate the interest income reported by Sockrite related to these bonds in 2013.
2.Calculate the interest expense reported by Paleo related to these bonds in 2013.
3.Calculate the gain or loss on retirement of bonds payable to be reported on consolidated financial statements in 2013.

Paleo Corporation Holds 80% of the Capital Stock of Sockrite