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 38

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:
$$\begin{array} { l l } 6 \% \text { bonds payable } & \$ 300,000 \\\text { Premium on bonds } & 7,200 \\\text { Interest expense } & 16,200\end{array}$$ $$\begin{array} { l l } \text { Investment in Pascalian bonds } & \$ 97,600 \\\text { Interst income } & 6,600\end{array}$$
-Consolidated Interest Expense and consolidated Interest Income,respectively,that appeared on the consolidated income statement for the year ended December 31,2013 was

• A)$10,800 and $0.
• B)$10,800 and $6,600.
• C)$0 and $0.
• D)$16,200 and $6,600.

Understanding the characteristics and implications of issuing preference shares.

Knowledge of dividend policies and their effect on preference and ordinary shares.

Understanding financial mechanisms corporations use to manage shares and shareholder equity.

Ability to calculate dividends and understand the impact on shareholders.

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Definitions:

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