The constructive gain or loss that should appear in the consolidated income statement of Pamba Corporation and Subsidiary for 2015 is:

Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable
Section: Chapter Questions
Problem 21E: On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be...
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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

a.
$51,000 gain
b.
$48,000 gain
c.
$55,000 loss
d.
$45,000 loss
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