Question

I need explanation on this questions. I saw the answers. But I don't understand how to do these. Please explain.

On January 1, 20X4, Passive Heating Corporation paid $104,000 for $100,000 par value, 9 percent bonds of Solar Energy Corporation. Solar
had issued $300,000 of the 10-year bonds on January 1, 20X2, for $360,000. The bonds pay interest semiannually. Passive previously had
purchased 80 percent of the common stock of Solar on January 1, 20X1, at underlying book value.
Passive reported operating income (excluding income from subsidiary) of $50,000, and Solar reported net income of $30,000 for 20X4.

Assume the same facts as in E8-6 except that the company uses straight-line amortization.
Required
Select the correct answer for each of the following questions.
1. What amount of interest expense should be included in the 20X4 consolidated income statement?
a. $14,000
b. $18,000
c. $21,000
d. $27,000
2. What amount of gain or loss on bond retirement should be included in the 20X4 consolidated income statement?
a. $4,000 gain
b. $4,000 loss
c. $12,000 gain
d. $16,000 loss

3. Income assigned to the noncontrolling interest in the 20X4 consolidated income statement should be
a. $6,000.
b. $8,100.
c. $8,400.
d. $16,000.

Answer 1

1) amount of interest expenses
300000*0.09 - (60000/10yr)*200000/300000
21000*0.666667 = $ 14000
Option a is correct
2) amount of gain or loss on bond
120000- (20000/10yr)*2yr-104000
$12000 gain
option c is correct
3) Income assigned to the noncontrolling ineterest
x				$ 30,000.00
unrecognized portion o gain on bond retirement
(12000-1500)				$ 10,500.00
				$ 40,500.00
stock held by noncontrolling interest				0.2
income recontrolling interest (40500*0.2)				$   8,100.00
Option b is correct