Hunter Corporation holds 80 percent of the voting shares of Moss Company. On January 1, 20X8, Moss purchased $100,000 par value 12 percent Hunter bonds from Cruse Corporation for $115,000. Hunter originally issued the bonds to Cruse on January 1, 20X6, for $110,000. The bonds have an 8-year maturity from the date of issue and pay interest semiannually on June 30 and December 31 each year. Moss' reported net income of $65,000 for 20X8, and Hunter reported income (excluding income from ownership of Moss's stock) of $90,000. Hunter's partial bond amortization schedule is as follows:

-Based on the information given above,what amount of interest expense does Hunter record on its individual books in 20X8?

Question

Hunter Corporation holds 80 percent of the voting shares of Moss Company. On January 1, 20X8, Moss purchased $100,000 par value 12 percent Hunter bonds from Cruse Corporation for $115,000. Hunter originally issued the bonds to Cruse on January 1, 20X6, for $110,000. The bonds have an 8-year maturity from the date of issue and pay interest semiannually on June 30 and December 31 each year. Moss' reported net income of $65,000 for 20X8, and Hunter reported income (excluding income from ownership of Moss's stock) of $90,000. Hunter's partial bond amortization schedule is as follows:
 
-Based on the information given above,what amount of interest expense does Hunter record on its individual books in 20X8?

Quizplus · Accepted Answer

Hunter records interest expense of $10,950 on its individual books in 20X8 because the interest rate is 10% and the principal balance is $109,500.

Hunter Corporation Holds 80 Percent of the Voting Shares of Moss