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

Question

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 interest expense will be eliminated in the preparation of the December 31, 20X9 consolidated financial statements?

A. $9,483
B. $13,292
C. $16,296
D. $18,988

Answer 1

Answer: B