On January 1,20X6,Nichols Corporation Issued 10-Year Bonds at Par to Unrelated

question 32

Multiple Choice

On January 1,20X6,Nichols Corporation issued 10-year bonds at par to unrelated parties.The bonds have a 10% stated rate,face value of $300,000,and pay interest every June 30 and December 31.On December 31,20X9,Harn Corporation purchased all of Nichols' bonds in the open market at a $6,000 discount.Harn is Nichols' 80 percent owned subsidiary.Harn uses the effective interest method of amortization.The consolidated income statement for the year 20X9 should report with respect to the bonds:
I.interest expense of $30,000.
II.an extraordinary gain of $6,000.

• A) I
• B) II
• C) Either I or II
• D) Neither I nor II

---

Definitions:

Permutations

Arrangements of a set of objects in which the order of the objects matters.

Experimental Outcomes

The possible results or observations that may be obtained in an experiment, reflecting the impact of various factors or variables.

Objects

Objects are instances of classes or types in programming, representing data with attributes and methods, or in a broader sense, physical entities that exist in the real world.

Classical Method

A method of assigning probabilities that is appropriate when all the experimental outcomes are equally likely.