Use the Following Information to Answer Questions

question 13

Multiple Choice

Use the following information to answer Questions
Parker Company owns 90% of the outstanding common stock of Stagger Company.On January 1, 2014, Stagger Company issued $500,000, 12%, ten-year bonds.
On January 1, 2013, Parker Company paid $315,000 for Stagger Company bonds with a par value of $300,000 and a carrying value of $297,600.Both companies use the straight-line method to amortize bond premiums and discounts.Parker Company accounts for the investment using the cost method of accounting.
-The total gain or loss on the constructive retirement of the debt to be reported in the 2013 consolidated income statement is

• A)$15,000 loss.
• B)$15,000 gain.
• C)$17,400 loss.
• D)$17,400 gain.
• E)$ 2,400 loss.

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Definitions:

Gearset

An assembly of gears designed to transfer mechanical energy from one section of a machine to another.

Spur Gear

A type of gear with straight teeth mounted on a parallel shaft, used in machinery to transmit motion and power.

Machined Straight

The process of shaping or finishing a material, usually metal, to create a straight and precise surface using a machine tool.

Teeth

Hard, enamel-covered structures found in the mouth of many animals, including humans, used for biting, chewing, and aiding in digestion.