Use the Following Information to Answer the Question(s) Below $$\begin{array} { l l } \text { Investment in Pascalian bonds } & \$ 97,600 \\\text { Interst income } & 6,600\end{array}$$

question 22

Multiple Choice

Use the following information to answer the question(s) below.

Pascalian Company owns a 90% interest in Sapp Company. On January 1, 2013, Pascalian had $300,000, 6% bonds outstanding with an unamortized premium of $9,000. The bonds mature on December 31, 2017. Sapp acquired one-third of Pascalian's bonds in the open market for $97,000 on January 1, 2013. Both companies use straight-line amortization of bond discounts/premiums. Interest is paid on December 31. On December 31, 2013, the books of the two affiliates held the following balances:
$$\begin{array} { l l } 6 \% \text { bonds payable } & \$ 300,000 \\\text { Premium on bonds } & 7,200 \\\text { Interest expense } & 16,200\end{array}$$ $$\begin{array} { l l } \text { Investment in Pascalian bonds } & \$ 97,600 \\\text { Interst income } & 6,600\end{array}$$
-With respect to the bond purchase,the consolidated income statement of Pfadt Corporation and Subsidiary for 2013 showed a gain or loss of

• A)$ 4,500.
• B)$ 5,000.
• C)$10,800.
• D)$12,000.

---

Definitions:

Rights Exercised

Entails the act of utilizing legal or contractual entitlements by individuals or entities.

Par Stock

The nominal or face value assigned to shares of stock by the corporation's charter, which may differ from their market value.

Market Value Method

An accounting method that values assets or securities at their current market prices rather than at historical costs or book values.

Book Value Method

An accounting technique where assets are valued in the balance sheet at their original cost minus any accumulated depreciation.