Consolidated amounts when affiliate’s debt is acquired from non-affiliate 

Assume that a Parent company owns 80 percent of its Subsidiary. On January 1, 2019, the Parent company had a $300,000 (face) 8 percent bond payable outstanding with a carrying value of $286,800. Several years ago, the bond was originally issued to an unaffiliated company for 92 percent of par value. On January 1, 2019, the Subsidiary acquired the bond for $274,500. During 2019, the Parent company reported $1,140,000 of (pre-consolidation) income from its own operations (i.e., prior to any equity method adjustments by the Parent company) and after recording interest expense. The Subsidiary reported $330,000 of (pre-consolidation) income from its own operations after recording interest income. Related to the bond during 2019, the parent reported interest expense of $25,800 while the subsidiary reported interest income of $9,200.

Determine the following amounts that will appear in the 2016 consolidated income statement:

a. Interest income from bond investment.

b. Interest expense on bond payable.

c. Gain (loss) on constructive retirement of bond payable.

Use a negative sign with answer to indicate a loss..

d. Controlling interest in consolidated net income.

e. Non-controlling interest in consolidated net income.