Light Corporation owns 80 percent of Sound Company's voting shares.On January 1,2007,Sound sold bonds with a par value of $300,000 at 95.Light purchased $200,000 par value of the bonds;the remainder was sold to nonaffiliates.The bonds mature in ten years and pay an annual interest rate of 6 percent.Interest is paid semiannually on January 1 and July 1.
-Based on the information given above,what amount of interest receivable will be recorded by Light Corporation on December 31,2008,in its separate financial statements?

Question

Quizplus · Accepted Answer

As of December 31, 2008, Light Corporation will have owned the bonds for two years, and therefore, will be entitled to receive two semiannual interest payments. The amount of interest receivable by Light Corporation can be calculated as follows:

$200,000 (par value) x 6% (annual interest rate) x 6/12 (semiannual period) x 2 (number of semiannual periods) = $6,000

Therefore, the correct answer is D) $6,000.

Light Corporation Owns 80 Percent of Sound Company's Voting Shares