Question 27 (2.5 points)
On January 1, 20X6, Pizza Corporation issued 10-year bonds at par to unrelated parties. The bonds pay
interest of $15,000 every June 30 and December 31. On December 31, 20X9, Spaghetti Corporation
purchased all of Pizza's bonds in the open market at a $6,000 discount. Spaghetti is Pizza's 80 percent own
subsidiary. Spaghetti uses the straight line method of amortization. The consolidated income statement for
the year 20X9 should report with respect to the bonds:
I. an interest income of $6,000.
II. interest expense of $30,000.