Paper Corporation Holds 80 Percent of the Voting Shares of Scissor

question 12

Multiple Choice

Paper Corporation holds 80 percent of the voting shares of Scissor Company.On January 1,20X8,Scissor purchased $100,000 par value 12 percent first mortgage bonds of Paper from Cruse for $115,000.Paper originally issued the bonds to Cruse on January 1,20X6,for $110,000.The bonds have an 8-year maturity from the date of issue.Scissor's reported net income of $65,000 for 20X8,and Paper reported income (excluding income from ownership of Scissor's stock) of $90,000.
-Based on the information given above,what gain or loss on the retirement of bonds should be reported in the 20X8 consolidated income statement?

• A)$6,250 gain
• B)$7,500 gain
• C)$7,500 loss
• D)$6,250 loss

---

Definitions:

Aggregate Demand

The complete call for goods and services across an economy, set at a particular price level and over a definite timeframe.

John Maynard Keynes

British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

Aggregate Demand

Total economic desires for all goods and services at a uniform price level over a specific period.

Government Interference

Involvement by government in market operations, which can range from regulations and taxes to direct control and ownership of services.