1 Select from the drop-down option whether the bond will sell at a Premium, Discount, or Face Value for each of the following conditions a b The stated rate of interest is higher than the market rate The market rate of interest is equal to the stated rate The market rate of interest is less than the stated rate The stated rate of interest is less than the market rate The market rate of interest is higher than the stated rate d e 2 Compute the cash proceeds from bond issues under the following terms. For each case, indicate whether the bonds sold at a preium or discount. Cash Proceeds Discount or Premium a Pear, Inc issued $225,000 of 10-year, 8% bonds at 103 b Apple, Inc. issued $130,000 of five-year, 12% bonds at 98 c Cherry Co. issued $148,000 of five-year, 6% bonds at 103 d Grape, Inc issued $34,000 of four-year, 8% bonds at 95 3 During Year 1 and Year 2, Huxman Corp. completed the following transactions relating to its bond issue. Prepare the journal entries for the following transactions. Huxman Corp issued $220,000 of 5-year, 6% bonds for $211,000. The annual cash payment for interest is due on December 31. Record the issuance of the bond in general journal format Record interest expense, including the straight-line amortization of the discount and the cash payment of interest for Year 1. Record interest expense, including the straight-line amortization of the discount and the cash payment of interest for Year 2