1. Merchant Company issued 10-year bonds on January 1. The 7% bonds have a face value of $709,000 and pay interest every January 1 and July 1. The bonds were sold for $589,257 based on the market interest rate of 8%. Merchant uses the effective interest method to amortize bond discounts and premiums. On July 1 of the first year, Merchant should record interest expense (round to the nearest dollar) of

a.$23,570

b.$20,624

c.$28,360

d.$24,815

2. Franklin Corporation issues $94,000, 10%, five-year bonds on January 1 for $98,200. Interest is paid semiannually on January 1 and July 1. If Franklin uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized on July 1 is

a.$4,280

b.$3,760

c.$7,520

d.$4,180

3. Bonds Payable has a balance of $991,000 and Premium on Bonds Payable has a balance of $10,901. If the issuing corporation redeems the bonds at 103, what is the amount of gain or loss on redemption?

a.$18,829 loss

b.$10,901 loss

c.$1,020,730 gain

d.$10,901 gain