A corporation plans to invest $1 million in oil exploration. The corporation is considering two plans to raise the money. Under Plan #1, bonds with a contract rate of interest of 6% would be issued. Under Plan #2, 50,000 additional shares of common stock would be issued at $20 per share. The corporation currently has 300,000 shares of stock outstanding, and it expects to earn $700,000 per year before bond interest and income taxes. The net income and return on investment for both plans is shown below:

	Plan #1	Plan #2
Earnings before bond interest and taxes	$ 700,000	$ 700,000
Bond interest expense	(60,000)
Income before taxes.	$ 640,000	$ 700,000
Income taxes	(224,000)	(245,000)
Net income	$ 416,000	$ 455,000
Equity	$8,000,000	$9,000,000
Return on Equity	5.2%	5.06%

Explain the amortization of a bond premium. Identify and describe the amortization methods available.

What are methods that a company may use to retire its bonds?

Describe the recording procedures for the issuance, retirement, and payment of interest for installment notes.