Spice Company Issued $200,000 of 10 Percent First Mortgage Bonds

question 8

Multiple Choice

Spice Company issued $200,000 of 10 percent first mortgage bonds on January 1,20X4,at 105.The bonds mature in 10 years and pay interest semiannually on January 1 and July 1.Pumpkin Corporation purchased $140,000 of Spice's bonds from the original purchaser on December 31,20X8,for $125,000.Pumpkin owns 75 percent of Spice's voting common stock.
-Based on the information given above,what amount of premium on bonds payable will be eliminated in the preparation of the 20X8 consolidated financial statements?

• A)$3,500
• B)$2,800
• C)$5,000
• D)$2,500

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Definitions:

Standard Error

A statistical measure that describes the accuracy with which a sample distribution represents a population using standard deviation.

Economics Class

A course of study that examines the production, distribution, and consumption of goods and services, focusing on economic theories and principles.

Interval Estimate

An estimate of a population parameter that specifies a range within which the parameter is expected to lie.

Confidence Interval

A variety of data points, taken from sample statistics, with a high likelihood of encasing an unknown population trait's value.