Chapter 8, Problem 8.6.3E

Multiple−Choice Questions (Effective Interest Method)

On January 1, 20X4, Passive Heating Corporation paid $104,000 for $100,000 par value, 9 percent bonds of Solar Energy Corporation. Solar had issued $300,000 of the 10−year bonds on January 1, 20X2, for $360,000. The bonds pay interest semiannually. Passive previously had purchased 80 percent of the common stock of Solar on January 1, 20X1, at underlying book value.

Passive reported operating income (excluding income from subsidiary) of $50,000, and Solar reported net income of $30,000 for 20X4.

Required

Select the correct answer for each of the following questions.

3. Income assigned to the noncontrolling interest in the 20X4 consolidated income statement should be

a. $6,534.

b. $8,321.

c. $8,388.

d. $16,826.