Multiple Choice
Duncan Inc. owned all of the outstanding stock of Brandt Co. The subsidiary had bonds payable outstanding on January 1, 2020, with a book value of $270,000. The parent acquired the bonds on that date for $291,000. Subsequently, Duncan reported interest income of $26,000 in 2020 while Brandt reported interest expense of $31,000. Consolidated financial statements were prepared for 2021. What adjustment would be required for the retained earnings balance as of January 1, 2021?
A) Reduction of $5,000.
B) Reduction of $16,000.
C) Reduction of $26,000.
D) Reduction of $31,000.
E) Reduction of $57,000.
Correct Answer:
Verified
Correct Answer:
Verified
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