Question

1.

A company has bonds with a principal value of $1,000,000 outstanding. The unamortized premium on the bonds is $14,400. The company redeemed the bonds at 101. What is the company’s gain or loss on the redemption?

Group of answer choices

$4,400 gain

$4,400 loss

$0

$10,000 loss

$10,000 gain

2.

In the current year, a corporation had sales of $500,000, net income of $150,000, interest expense of $30,000, and tax expense of $20,000. Its net sales were $1,000,000 and its cost of goods sold was $200,000. What was its times interest earned for the year?

Group of answer choices

5.00

4.00

7.50

6.67

5.55

Answer 1

1.)	Bond principal Value	1,000,000
	Add: Unamortized premium on bond	14,400
	Carrying value of Bonds	1,014,400
	Less: Redemption Value	-1,010,000	=1000000*101%
	Gain (loss) on redemption	$ 4,400
	Correct answer is option 1
2.)	Net Income	150,000
	Add: Tax Expense	20,000
	Add: Interest Expense	30,000
	Earnings before Interest & Tax	200,000
	/ Interest Expense	30,000
	Times Interest Earned for the year	6.67
	Correct answer is option 4.