Use the Following Information to Answer the Question(s)below

question 4

Multiple Choice

Use the following information to answer the question(s) below.
Plenty Corporation issued six thousand,$1,000 par,6% bonds on January 1,2010,at par.Interest is paid on January 1 and July 1 of each year;the bonds mature on January 1,2015.On January 2,2012,Scrawn Corporation,a 75%-owned subsidiary of Plenty,purchased 3,000 of the bonds on the open market at 102.50.Plenty's separate net income for 2012 included the annual interest expense for all 3,000 bonds.Scrawn's separate net income for 2012 was $400,000,which included the bond interest received on July 1 as well as the accrual of bond interest revenue earned on December 31.Both companies use straight-line amortization of bond discounts/premiums.
-If the bonds were originally issued at 103,and 70% of them were purchased on January 2,2014 at 104,the constructive gain or (loss) on the purchase was

• A)$(142,800).
• B)$( 42,000).
• C)$ 42,000.
• D)$ 142,800.

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