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

question 1

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 interest expense will be eliminated in the preparation of the 20X9 consolidated financial statements?

• A)$17,000
• B)$13,300
• C)$18,500
• D)$22,200

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Definitions:

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A decision-making process where the option receiving more than half of the votes from a group is selected or approved.

Special Funds

Financial resources set aside for a specific purpose or project, often within a larger organization or government.

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