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What gain or loss on retirement of bonds should be reported

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Question - Hunter Corporation holds 80 percent of the voting shares of Moss Company. On January 1, 2008, Moss purchased $100,000 par value 12 percent first mortgage bonds of Hunter from Cruse for $115,000. Hunter originally issued the bonds to Cruse on January 1, 2006, for $110,000. The bonds have a 8-year maturity from the date of issue. Moss' reported net income of $65,000 for 2008, and Hunter reported income (excluding income from ownership of Moss's stock) of $90,000.

Based on the information given above, what gain or loss on the retirement of bonds should be reported in the 2008 consolidated income statement?

A. $6,250 gain

B. $7,500 gain

C. $7,500 loss

D. $6,250 loss

Reference no: EM131795703

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