Porter Company received proceeds of $211,500 on 10-year, 8% bonds issued on January 1, 2006. The bonds had a face value of $200,000, pay interest annually on December 31st, and have a call price of 102. Porter uses the straight-line method of amortization.
What is the amount of interest Porter must pay the bondholders in 2006?
a. $16,920
b. $16,000
c. $16,320
d. $1,692
What is the amount of interest expense Porter will show with relation to these bonds for the year ended December 31, 2007?
a. $16,000
b. $16,920
c. $14,850
d. $12,550
What is the carrying value of the bonds on January 1, 2008?
a. $200,000
b. $209,200
c. $190,800
d. $210,350
Porter Company decided to redeem the bonds on January 1, 2008. What amount of gain or loss would Porter report on their 2008 income statement?
a. $9,200 gain
b. $5,200 gain
c. $5,200 loss
d. $9,200 loss