1) On January 1, Marigold Corp. issued $6600000, 9% bonds for $7029000. The market rate of interest for these bonds is 8%. Interest is payable annually on December 31. Marigold uses the effective-interest method of amortizing bond premium. At the end of the first year, Marigold should report unamortized bond premium of:
$397320
$398580
$375320
$297000
2) A corporation called an outstanding bond obligation four years before maturity. At that time there was an unamortized discount of $1420000. To extinguish this debt, the company had to pay a call premium of $530000. Ignoring income tax considerations, how should these amounts be treated for accounting purposes?
Amortize $1950000 over four years.
Charge $1950000 to a loss in the year of extinguishment.
Charge $530000 to a loss in the year of extinguishment and amortize $1420000 over four years.
Either amortize $890000 over four years or charge $890000 to a loss immediately, whichever management selects.
3) A company issues $25200000, 7.8%, 20-year bonds to yield 8% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $24701220. What is interest expense for 2018, using straight-line amortization?
$1941058
$1977288
$1990539
$1965600
4) A company issues $14900000, 5.8%, 20-year bonds to yield 6% on January 1, 2017. Interest is paid on June 30 and December 31. The proceeds from the bonds are $14555590. What is interest expense for 2018, using straight-line amortization?
$864200
$873470
$881421
$1236784
5) On January 1, 2018, Bonita Industries sold property to Carla Vista Company. There was no established exchange price for the property, and Carla Vista gave Bonita a $5900000 zero-interest-bearing note payable in 5 equal annual installments of $1180000, with the first payment due December 31, 2018. The prevailing rate of interest for a note of this type is 9%. The present value of the note at 9% was $4589846 at January 1, 2018. What should be the balance of the Discount on Notes Payable account on the books of Carla Vista at December 31, 2018 after adjusting entries are made, assuming that the effective-interest method is used?
$935153.
$0.
$897068.
$1310154.