Puget Corporation Owns 80 Percent of Sound Company's Voting Shares

question 28

Multiple Choice

Puget Corporation owns 80 percent of Sound Company's voting shares.On January 1,20X7,Sound sold bonds with a par value of $300,000 at 95.Puget purchased two thirds of the bonds;the remainder was sold to nonaffiliates.The bonds mature in ten years and pay an annual interest rate of 6 percent.Interest is paid semiannually on January 1 and July 1.
-Based on the information given above,what amount of interest expense will be eliminated in the preparation of the 20X8 consolidated financial statements?

• A)$13,000
• B)$13,500
• C)$10,000
• D)$15,000

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Definitions:

Marginal Utility

The additional satisfaction or benefit (utility) that a person receives from consuming one more unit of a good or service.

Utils

A hypothetical unit of measurement used in economics to quantify utility or the satisfaction gained from consuming goods and services.

Indifference Curve

A contour line showing all consumption bundles that yield the same amount of total utility for an individual.

Total Utility

The overall satisfaction or benefit that a consumer derives from consuming a particular quantity of goods or services.