On January 1, 2009, Pace Corporation issued $500,000 par value, 10-year, 15% bonds. Interest is payable each June 30 and December 31. On January 1, 2012, Supra Corporation, a 90%-owned subsidiary, purchased on the open market all of the parent company bonds. Both companies have a December 31 year-end. For this problem, assume the following four independent cases.

Required:
A. For cases 1 and 2, compute the total constructive gain or loss and the portion allocated to each company.
B. For cases 1 and 2 prepare the journal entry or entries to be made by Pace Corporation and Supra Corporation on June 30, 2012. Both companies amortize discounts and premiums each interest payment date and use the straight-line method of amortization. Assume that Pace uses the partial equity method to account for its investment in Supra.
C. Complete the following schedules as of December 31, 2012, after the December 31 interest payment (receipt) and amortization of discount or premium have been recorded.

D. For cases 1 and 2, prepare in general journal form the intercompany bond elimination entries required in the December 31, 2012, consolidated statements work paper.

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Issue Price by Pace Corporation on January 1, 2009 $512,000 488,000 512,000 488,000 Purchase Price by Supra Corporation on January 1, 2012 $514,000 486,000 486,000 514,000 ase Case 2 Case 3 Case 4 Issue Price Pace Corporation Bond Payable Unamortized Premium (discount) Carrying Value of Bonds 2012 Cash Payment for Interest (Premium) Discount Amortization 2012 Bond Interest Expense Increase (decrease) in Net Income from Amortization $512,000 $488,000 Purchase Price Supra Corporation $514,000 $486,000 Investment in Pace Corp. Bonds 2012 Cash Receipts for Interest (Premium) Discount Amortization 2012 Bond Interest Income Increase (decrease) in Net Income from Amortization Case 4 constructive gain (loss) recognized by Pace Amount of Corporation Amount of constructive gain loss) recognized by Supra Corporation