Keenan Company Has Had Bonds Payable of $20,000 Outstanding for Several

Multiple Choice

Keenan Company has had bonds payable of $20,000 outstanding for several years.On January 1,2009,when there was an unamortized premium of $2,000 with a remaining life of 10 years,Keenan's parent,Ross,Inc. ,purchased the bonds in the open market for $19,000.Keenan is a 90% owned subsidiary of Ross.The bonds pay 8% interest annually on December 31.The companies use the straight-line method to amortize interest revenue and expense.Compute the consolidated gain or loss on a consolidated income statement for 2009.

A) $3,000 gain.
B) $3,000 loss.
C) $1,000 gain.
D) $1,000 loss.
E) $2,000 gain.