Powell Company owns an 80% interest in Sauter, Inc. On January 1, 2011, Sauter issued $400,000 of 10-year, 12% bonds at a premium of $50,000. On December 31, 2015, 5 years after original issuance, Powell purchased all of the outstanding bonds for $390,000. Both firms use the straight-line method of amortization. The interest adjustment in the 2015 subsidiary income distribution schedule is ____. a. $2,000 b. $5,000 c. $4,500 d. $0
Powell Company owns an 80% interest in Sauter, Inc. On January 1, 2011, Sauter issued $400,000 of 10-year, 12% bonds at a premium of $50,000. On December 31, 2015, 5 years after original issuance, Powell purchased all of the outstanding bonds for $390,000. Both firms use the straight-line method of amortization. The interest adjustment in the 2015 subsidiary income distribution schedule is ____. a. $2,000 b. $5,000 c. $4,500 d. $0
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter15: Investments And Fair Value Accounting
Section: Chapter Questions
Problem 5E
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Powell Company owns an 80% interest in Sauter, Inc. On January 1, 2011, Sauter issued $400,000 of 10-year, 12% bonds at a premium of $50,000. On December 31, 2015, 5 years after original issuance, Powell purchased all of the outstanding bonds for $390,000. Both firms use the straight-line method of amortization.
The interest adjustment in the 2015 subsidiary income distribution schedule is ____.
a. |
$2,000 |
b. |
$5,000 |
c. |
$4,500 |
d. |
$0 |
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