Sun Company Is a 100%-Owned Subsidiary of Peter Company

question 33

Multiple Choice

Sun Company is a 100%-owned subsidiary of Peter Company. On January 1, 20X1, Sun Company has $500,000 of 8% face rate bonds outstanding, with an unamortized discount of $5,000 that is being amortized over a 5 year remaining life to maturity. On that date, Peter Company purchased the bonds for $497,000. The adjustment to the consolidated income of the two companies needed in the consolidation process for 20X2 (the following year) is ____.

• A)$2,800 increase
• B)$400 decrease
• C)$400 increase
• D)$2,800 decrease

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