Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two compan
ID: 2590924 • Letter: H
Question
Highlight, Inc., owns all outstanding stock of Kiort Corporation. The two companies report the following balances for the year ending December 31, 2017: Highlight $ (670,000) Kiort Revenues and interest income Operating and interest expense Other gains and losses Net income $ (390,000) 221,000 32,000) (250, 000) (201,000) 540,000 120, 000) Note: Parentheses indicate a credit balance. On January 1, 2017, Highlight acquired on the open market bonds for $108,000 originally issued by Kiort. This investment had an effective rate of 8 percent. The bonds had a face value of $100,000 and a cash interest rate of 9 percent. At the date of acquisition, these bonds were shown as liabilities by Kiort with a book value of $84,000 (based on an effective rate of 11 percent). Determine the balances that should appear on a consolidated income statement for 2017 Revenues and interest income Operating and interest expense Other gains and losses Net incomeExplanation / Answer
Particulars
Working
$
Interest expense to be eliminated
84000*11%
9240
Interest income to be eliminated
108000*8%
8640
Loss to be recognized
108000-84000
24000
Particulars
Working
$
Revenue and interest income
(670000+390000-8640)
1051360
Other gains and losses
120000+32000
152000
1203360
Operating and interest expense
(540000+221000-9240)
751760
Loss on retirement of Debt
24000
775760
Net income
427600
Particulars
Working
$
Interest expense to be eliminated
84000*11%
9240
Interest income to be eliminated
108000*8%
8640
Loss to be recognized
108000-84000
24000
Particulars
Working
$
Revenue and interest income
(670000+390000-8640)
1051360
Other gains and losses
120000+32000
152000
1203360
Operating and interest expense
(540000+221000-9240)
751760
Loss on retirement of Debt
24000
775760
Net income
427600
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.