1/ A company issued 10.0%, 5-year bonds with a par value of $160,000. The market rate when the bonds were issued was 11.0%. The company received $153,969.90 cash for the bonds. Using the effective interest method, the amount of interest expense for the second semiannual interest period is:

Multiple Choice

$8,000.00.

$8,494.10.

$8,468.34.

$16,000.00.

$16,962.44.

2/ 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.