1. Which of the following statements is true concerning bonds issued at par? A. All of the above are true statements. B. When bonds are issued at par, Cash is debited and Bonds Payable is credited for the bonds' par value. C. The stated interest rate equals the market interest rate for a bond issued at par. D. Proceeds for bonds issued at par equals the par value of the bond. E. Bond Interest Expense is calculated as bond par value multiplied by the bond contract rate.

2. When will bonds sell at a premium? A. None of the above B. Bonds do not sell at premiums. C. When the market rate of the bonds is lower than the contract rate. D. When the market rate of the bonds is higher than the contract rate. E. When the market rate of the bonds is equal to the contract rate.

3. Ten-year bonds with a par value of $100,000, and 8% annual interest, were sold for $106,000 on July 1, when the market rate of interest was 7%. The bonds pay interest on July 1 and January 1 of each year. The issuer uses STRAIGHT-LINE amortization of premium. The December 31, year-end ADJUSTING entry for accrued interest will include which of the following? A. A debit to Premium on Bonds Payable for $300 B. A debit to Bond Interest Expense of $4,000 C. None of the above D. A DEBIT to Bond Interest Payable for $4,000 E. A credit to Bond Interest Payable for $3,700