What amount of interest expense should be reported

Reference no: EM132751056

PROBLEM - Bond sale directly to an affiliate

Wood Corp owns 70 percent of Carter Co's voting shares. On January 1, 20X3, Carter sold bonds with a par value of $600,000 at 98 when the market interest rate is 8.5 percent. Wood purchased $400,000 par value of the bonds; the remainder was sold to nonaffiliates. The bonds mature in five years and pay an annual interest rate of 8 percent. Interest is paid semiannually on January 1 and July 1. What amount of 20X4 interest expense should be reported, in Carter's books and the consolidated income statement?

Reference no: EM132751056

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