Stevens Company has had bonds payable of $10,000 outstanding for several years. On January 1, 2018, when there was an unamortized discount of $2,000 and a remaining life of 5 years, its 80% owned subsidiary, Matthews Company, purchased the bonds in the open market for $11,000. The bonds pay 6% interest annually on December 31. The companies use the straight-line method to amortize interest revenue and expense. Compute the consolidated gain or loss on a consolidated income statement for 2018.
A. $2,000 loss.
B. $3,000 gain.
C. $1,000 gain.
D. $3,000 loss.
E. $1,000 loss.
Answer: D
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