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

question 26

Multiple Choice

Use the following information to answer the question(s) below.
Pascalian Company owns a 90% interest in Sapp Company.On January 1,2010,Pascalian had $300,000,6% bonds outstanding with an unamortized premium of $9,000.The bonds mature on December 31,2014.Sapp acquired one-third of Pascalian's bonds in the open market for $97,000 on January 1,2010.Both companies use straight-line amortization of bond discounts/premiums.Interest is paid on December 31.On December 31,2010,the books of the two affiliates held the following balances:

-The gain from the bond purchase that appeared on the December 31,2010 consolidated income statement was

• A)$4,320.
• B)$4,800.
• C)$5,400.
• D)$6,000.

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Definitions:

Activity Level

A measure of the volume of production or operations, usually influencing costs and revenues in managerial accounting.

Decentralization

Control of operations is delegated to many managers throughout the organization.

Top Management

The highest level of managers in an organization, responsible for controlling and directing the overall operations.

Control Of Operations

The oversight and management of core business activities to ensure efficiency, effectiveness, and alignment with organizational objectives.