Answered: The constructive gain or loss that…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Samba Corporation is a 80% owned subsidiary of Pamba Corporation. On January 2, 2015, Samba purchased $600,000 par of Pamba’s $900,000 outstanding bonds for $705,000 in the bond market. Pamba’s bonds have an 8 percent interest rate, pay interest on January 1 and July 1, and mature on January 1, 2019. There was $45,000 unamortized premium on the bond issue on January 1, 2015. Assume straight-line amortization. The constructive gain or loss that should appear in the consolidated income statement of Pamba Corporation and Subsidiary for 2015 is:

Question 7Answer

$51,000 gain

$48,000 gain

$55,000 loss

$45,000 loss

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