Spice Company issued $200,000 of 10 percent first mortgage bonds on January 1,20X4,at 105.The bonds mature in 10 years and pay interest semiannually on January 1 and July 1.Pumpkin Corporation purchased $140,000 of Spice's bonds from the original purchaser on January 1,20X8,for $122,000.Pumpkin owns 75 percent of Spice's voting common stock.Spice's partial bond amortization schedule is as follows:

-Based on the information given above,what amount of premium on bonds payable will be eliminated in the preparation of the 20X8 year-end consolidated financial statements?

Question

Spice Company issued $200,000 of 10 percent first mortgage bonds on January 1,20X4,at 105.The bonds mature in 10 years and pay interest semiannually on January 1 and July 1.Pumpkin Corporation purchased $140,000 of Spice's bonds from the original purchaser on January 1,20X8,for $122,000.Pumpkin owns 75 percent of Spice's voting common stock.Spice's partial bond amortization schedule is as follows:
 
-Based on the information given above,what amount of premium on bonds payable will be eliminated in the preparation of the 20X8 year-end consolidated financial statements?

Quizplus · Accepted Answer

The premium on bonds payable that will be eliminated is $4,276, as this is the amount that needs to be adjusted to reflect the consolidated financial position accurately.

Spice Company Issued $200,000 of 10 Percent First Mortgage Bonds