1. When the contract rate is above the market rate, a bond sells at a premium.

TRUE OR FALSE.

2. Franklin Company's bank reconciliation as of August 31 is shown below.

Bank balance		$14,237	Book balance		$13,162
+ Deposit in transit		4,500	Bank service fees		50
Outstanding checks		3,900	Note collected		1,725
Adjusted bank balance		$14,837	Adjusted book balance		$14,837

The adjusting journal entries that Clayborn must record as a result of the bank reconciliation include:

Multiple Choice

• Debit Cash $1,725; credit Notes Receivable $1,725.

• Debit Cash $4,500; credit Sales $4,500.

• Debit Cash $50; credit Bank Service Fee Expense $50.

• Debit Notes Receivable $1,725; credit Cash $1,725.

• Debit Misc. Expense $3,900; credit Cash $3,900.