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a) P Company

Purchase Price $ 225,000.00


Par Value $ 240,000.00
Gain on constructive bonds $ 15,000.00

S Company
Premium amortization per period :
Premium Balance 12/31/2009 $ 9,000.00
Number of interest periods to maturity (2012 - 2015) 6
Amortization per period $ 1,500.00

Bonds Payable $ 400,000.00


Unamortized premium ($9,000 + 1,500) $ 10,500.00
Carrying value - 7/1/2009 $ 410,500.00
0.6
Carrying value of bonds retired $ 246,300.00
Par Value $ 240,000.00
Constructive Gain $ 6,300.00

b)

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