Stevens Company Has Had Bonds Payable of $10,000 Outstanding for Several

Multiple Choice

Stevens Company has had bonds payable of $10,000 outstanding for several years. On January 1, 2011, when there was an unamortized discount of $2,000 and a remaining life of 5 years, its 80% owned subsidiary, Matthews Company, purchased the bonds in the open market for $11,000. The bonds pay 6% 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 2011.

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