1. Rock Company received proceeds of $250,000 on 10-year, 10% bonds issued on January 1, 2020. The bonds had a face value of $225,000, pay interest annually on January 1, and have a call price of 102. Luke uses the straight-line method of amortization.

What is the amount of interest Luke must pay the bondholders on January 1, 2021?

a. $11,250

b. $20,000

c. $22,500

d. $25,000

2. Laz Corporation retires its $750,000 face value bonds at 102 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $760,000. The entry to record the redemption will include a

a. credit of $5,000 to Gain on Bond Redemption.

b. debit of $5,000 to Loss on Bond Redemption.

c. credit of $10,000 to Premium on Bonds Payable.

d. debit of $10,000 to Premium on Bonds Payable.

3. The adjusted trial balance for Bow Corp. at the end of the current year, 2018, contained the following accounts.

5-year Bonds Payable 8% $1,500,000

Interest Payable 50,000

Discount on Bonds Payable 100,000

Notes Payable (3 mo.) 40,000

Notes Payable (5 yr.) 145,000

Mortgage Payable ($10,000 due currently) 300,000

Salaries and Wages Payable 18,000

Taxes Payable (due 3/15 of 2019) 25,000

The total long-term liabilities reported on the balance sheet are

a. $1,645,000.

b. $1,835,000.

c. $1,935,000.

d. $2,035,000.

4. On January 1, Bass Corporation issues $1,000,000, 10-year, 10% bonds at 105 with interest payable on January 1. The carrying value of the bonds, using straight-line amortization, at the end of the second interest period is:

a. $960,000.

b. $1,000,000.

c. $1,040,000.

d. $1,050,000.

Important note:

PLEASE SHOW WORK FOR ALL QUESTIONS!