6. Hills Corp. called an outstanding bond obligation four years before maturity. At that time there was an unamortized discount of $ 200,000. To extinguish this debt, Hills had to pay a call premium of $ 40,000. Ignoring income tax considerations, how should these amounts be treated for accounting purposes? a . Record a $ 240,000 loss in the year of extinguishment b . Amortize $ 240,000 over four years. c . Either amortize $ 240,000 over four years or record a $ 240,000 loss immediately, whichever management selects.

d . Record a $ 40,000 loss in the year of extinguishment and amortize $ 200,000 over four years.

7. On January 1, 2020, Queen Ltd. sold property to King Company. There was no established exchange price for the property, and King gave Queen a $ 3,000,000, zero-interest-bearing note payable in five equal annual installments of $ 600,000, with the first payment due December 31, 2020. The market rate of interest for a note of this type is 9%. What should be the balance of the Note Payable to Queen Ltd. account on Kings December 31, 2020 adjusted trial balance, assuming that the note is recorded at net and the effective-interest method is used? (Round to the nearest dollar, if necessary.

a . $ 2,333,791

b . $ 1,943,832

c . $ 3,000,000

d . $ 2,400,000

8. In January, 2015, Tillicum Corp. purchased a patent for a new consumer product for $ 900,000. At the time of purchase, the patent was valid for 15 years. Due to the competitive nature of the product, however, the patent was estimated to have a useful life of only ten years. During 2020, the product was permanently removed from the market because of a potential health hazard. What amount should Tillicum recognize as an impairment loss for calendar 2020, assuming amortization has been recorded annually using the straight-line method with no residual value?

a . $ 600,000

b . $ 60,000

c . $ 90,000 d . $ 450,000

9. In 2020, Meleum Corp. began selling a new line of products that carry a two-year warranty against defects. Based upon past experience with other products, the estimated warranty costs related to dollar sales are as follows: First year of warranty 2% Second year of warranty 5% Sales and actual warranty expenditures for 2020 and 2021 are presented below: 2020 2021 Sales $ 450,000 $ 600,000 Actual warranty expenditures 15,000 30,000 Meleum uses the expense approach to account for warranties. What is the estimated warranty liability at the end of 2021?

a . $ 43,500

b . $ 12,000 c . $ 28,500

d . $ 73,500