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 $125,000. Pumpkin owns 75 percent of Spice's voting common stock. Spice's partial bond amortization schedule is as follows:PMT # Interest$ PMTInterestExpenseAmort ofDiscount(Premium)Premium(Discount)BondsPayableCV
ofBonds 1/1/20X4 10,000.00 200,000.00 210,000.00 1 7/1/20X4 10,000.00 9,684.96 (315.04) 9,684.96 200,000.00 209,684.96 2 1/1/20X5 10,000.00 9,670.43 (329.57) 9,355.38 200,000.00 209,355.38 3 7/1/20X5 10,000.00 9,655.23 (344.77) 9,010.61 200,000.00 209,010.61 4 1/1/20X6 10,000.00 9,639.33 (360.67) 8,649.94 200,000.00 208,649.94 5 7/1/20X6 10,000.00 9,622.69 (377.31) 8,272.63 200,000.00 208,272.63 6 1/1/20X7 10,000.00 9,605.29 (394.71) 7,877.92 200,000.00 207,877.92 7 7/1/20X7 10,000.00 9,587.09 (412.91) 7,465.01 200,000.00 207,465.01 8 1/1/20X8 10,000.00 9,568.04 (431.96) 7,033.05 200,000.00 207,033.05 9 7/1/20X8 10,000.00 9,548.12 (451.88) 6,581.18 200,000.00 206,581.18 10 1/1/20X9 10,000.00 9,527.28 (472.72) 6,108.46 200,000.00 206,108.46 11 7/1/20X9 10,000.00 9,505.48 (494.52) 5,613.94 200,000.00 205,613.94 12 1/1/20X0 10,000.00 9,482.68 (517.32) 5,096.62 200,000.00 205,096.62 Based on the information given above, what amount of premium on bonds payable will be eliminated in the preparation of the December 31, 20X9 consolidated financial statements?
A. $3,930
B. $5,614
C. $5,097
D. $3,568
Answer: D
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