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Ponga Company acquired a $20,000 bond originally issued by its 75%-owned subsidiary on January 2, 2015. Details: Original issuance price: $21,250 Maturity: January 1, 2020 Interest rate: 8% per year, payable December 31 Book value (on January 2, 2015): $20,625 Purchase price paid by Ponga: $18,500 Amortization method: Straight-line amortization  How much interest income should be eliminated in 2015?   a. $2,000 b. $1,900 c. $1,720 d. $1,800

Ponga Company acquired a $20,000 bond originally issued by its 75%-owned subsidiary on January 2, 2015. Details: Original issuance price: $21,250 Maturity: January 1, 2020 Interest rate: 8% per year, payable December 31 Book value (on January 2, 2015): $20,625 Purchase price paid by Ponga: $18,500 Amortization method: Straight-line amortization  How much interest income should be eliminated in 2015?   a. $2,000 b. $1,900 c. $1,720 d. $1,800

Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter10: Long-term Liabilities
Section: Chapter Questions
Problem 10.3P
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Ponga Company acquired a $20,000 bond originally issued by its 75%-owned subsidiary on January 2, 2015.

Details:

  • Original issuance price: $21,250
  • Maturity: January 1, 2020
  • Interest rate: 8% per year, payable December 31
  • Book value (on January 2, 2015): $20,625
  • Purchase price paid by Ponga: $18,500
  • Amortization method: Straight-line amortization

 How much interest income should be eliminated in 2015?

 

  • a. $2,000
  • b. $1,900
  • c. $1,720
  • d. $1,800
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