Question: 1. On 1/1/20X1, PDQ Corp issues $2.5 million of 15-year bonds at par value. The journal entry to record the issuance of bonds on 1/1/20X1 would include which of the following:
- Debit Interest Expense $2.5 million
- Credit Cash $2.5 million
- Credit Bonds Payable $2.5 million
- Debit Bonds Payable $2.5 million
- Credit Interest Expense $2.5 million
2. Alliance Products purchased equipment that cost $120,000. It had an estimated useful life of four years and no residual value. The equipment was depreciated by the straight-line method and was sold at the end of the third year of use for $25,000 cash. Alliance should record:
- A gain of $5,000.
- A loss of $5,000.
- Neither a gain nor a loss since the computer was sold at its book value.
- Neither a gain nor a loss since the gain would not be recognized.