Peter Corporation owns a 70% interest in Sundown Corporation acquired several years ago at a price equal to book value and fair value

On December 31, 2013, Sundown had $300,000 par of 6% bonds outstanding with an unamortized premium of $30,000. The bonds mature in five years and pay interest on January 1 and July 1. On January 2, 2014, Peter acquired one-third of Sundown's bonds for $117,000. Peter and Sundown use straight-line amortization. Sundown reports net income of $250,000 for 2014. Peter uses the equity method to account for the investment.
Required:
1. Calculate Peter's income from Sundown for 2014.
2. Calculate the noncontrolling interest share for 2014.
What will be an ideal response?

Preliminary computations:
Book value of bonds $330,000 × 1/3 = $110,000
Cost of bonds 117,000
Loss on constructive retirement $7,000

Requirement 1:
Income from Sundown:
Share of Sundown's income ($250,000 × 70%) $175,000
Less: Constructive loss ($7,000 × 70%) (4,900)
Plus: Piecemeal recognition of loss
($7,000/5 years) × 70% 980
Income from Sundown $171,080

Requirement 2:
Noncontrolling interest share:
Sundown's reported income $250,000
Less: Constructive loss on bonds (7,000)
Plus: Piecemeal recognition of loss 1,400
Equals: Adjusted reported income $244,400
Noncontrolling percentage 30%
Noncontrolling interest share $73,320