Question

21/ A company has bonds outstanding with a par value of $120,000. The unamortized premium on these bonds is $2,880. If the company retired these bonds at a call price of 97, the gain or loss on this retirement is:

Multiple Choice

$2,880 loss.

$3,600 gain.

$3,600 loss.

$2,880 gain.

$6,480 gain.

22/ On January 1 of Year 1, Congo Express Airways issued $3,400,000 of 7% bonds that pay interest semiannually on January 1 and July 1. The bond issue price is $3,100,000 and the market rate of interest for similar bonds is 8%. The bond premium or discount is being amortized at a rate of $10,000 every six months. The amount of interest expense recognized by Congo Express Airways on the bond issue in Year 1 would be:

Multiple Choice

$218,000.

$272,000.

$238,000.

$258,000.

$129,000.

23/ A company issued 6-year, 8% bonds with a par value of $650,000. The market rate when the bonds were issued was 7.5%. The company received $656,500 cash for the bonds. Using the straight-line method, the amount of recorded interest expense for the first semiannual interest period is:

Multiple Choice

$51,458.

$25,458.

$52,000.

$26,542.

$26,000.

24/ A corporation issued 8% bonds with a par value of $1,080,000, receiving a $36,000 premium. On the interest date 5 years later, after the bond interest was paid and after 40% of the premium had been amortized, the corporation purchased the entire issue on the open market at 99 and retired it. The gain or loss on this retirement is:

Multiple Choice

$0.

$10,800 gain.

$10,800 loss.

$32,400 gain.

$32,400 loss.

Answer 1