On January 1,20X6,Nichols Corporation Issued 10-Year Bonds at Par to Unrelated

question 24

Multiple Choice

On January 1,20X6,Nichols Corporation issued 10-year bonds at par to unrelated parties.The bonds pay interest of $15,000 every June 30 and December 31.On December 31,20X9,Harn Corporation purchased all of Nichols' bonds in the open market at a $6,000 discount.Harn is Nichols' 80 percent owned subsidiary.Harn uses the straight line method of amortization.The consolidated income statement for the year 20X9 should report with respect to the bonds:
I.interest expense of $30,000.
II.an extraordinary gain of $6,000.

• A) I
• B) II
• C) Either I or II
• D) Neither I nor II

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