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 January 1, 20X8, for $122,000. Pumpkin owns 75 percent of Spice's voting common stock. Spice's partial bond amortization schedule is as follows:PMT # Interest$ PMTInterestExpenseAmort ofDiscount(Premium)Premium(Discount)BondsPayableBV
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 13 7/1/20X0 10,000.00 9,458.82 (541.18) 4,555.44 200,000.00 204,555.44 ?Based on the information given above, what amount of premium on bonds payable will be eliminated in the preparation of the 20X8 year-end consolidated financial statements?
A. $7,033
B. $4,276
C. $6,108
D. $4,923
Answer: B
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