Saturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1,20X3,which Star Corporation purchased.Pluto Corporation owns 65% of Saturn's voting shares.On Jan 1,20X7,Pluto Corporation purchased $120,000 face value of Saturn bonds from Star for $118,020.On the date Pluto purchased the bonds,the bonds' carrying value on Saturn's book was $126,019.The bonds pay 12 percent interest annually on December 31.The preparation of consolidated financial statements for Saturn and Pluto at December 31,20X9,required the following consolidating entry:

-Based on the information given above,what amount of gain or loss on bond retirement is included in the 20X7 consolidated income statement?

Question

Saturn Corporation issued $300,000 par value 10-year bonds at 107 on January 1,20X3,which Star Corporation purchased.Pluto Corporation owns 65% of Saturn's voting shares.On Jan 1,20X7,Pluto Corporation purchased $120,000 face value of Saturn bonds from Star for $118,020.On the date Pluto purchased the bonds,the bonds' carrying value on Saturn's book was $126,019.The bonds pay 12 percent interest annually on December 31.The preparation of consolidated financial statements for Saturn and Pluto at December 31,20X9,required the following consolidating entry:
 
-Based on the information given above,what amount of gain or loss on bond retirement is included in the 20X7 consolidated income statement?

Quizplus · Accepted Answer

The gain of $8,000 on bond retirement is included in the 20X7 consolidated income statement, indicating that the bonds were retired at a value less than their carrying amount, resulting in a gain.

Saturn Corporation Issued $300,000 Par Value 10-Year Bonds at 107