Offenberg Company issued 100 000 of 10 percent bonds on January
Offenberg Company issued $100,000 of 10 percent bonds on January 1, 20X1, at 120. The bonds mature in 10 years and pay 10 percent interest annually on December 31. Mainstream Corporation holds 80 percent of Offenberg's voting shares, acquired on January 1, 20X1, at underlying book value. On January 1, 20X4, Mainstream purchased Offenberg bonds with a par value of $40,000 from the original purchaser for $44,000. Mainstream uses the modified equity method in accounting for its ownership in Offenberg. Partial balance sheet data for the two companies on December 31, 20X5, are as follows:

a. Compute the gain or loss on bond retirement reported in the 20X4 consolidated income statement.
b. Prepare the elimination entry needed to remove the effects of the intercorporate bond ownership in completing the consolidation worksheet for 20X5.
c. What balance should be reported as consolidated retained earnings on December 31,20X5?
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