A-The market rate is the rate that the borrowers are willing to pay and lenders are willing to accept.

True

False

B- A corporation issued 7%, 10-year bonds with a par value of $2,000,0000. The bonds pay semiannual interest. The market interest rate is 9% and the bond selling price was $1,864,097. The entry to record the issuance of the bond should be:

	a.	Debit Cash $2,000,000; credit Bonds Payable $1,864,097; credit Discount on Bonds Payable $135,903.
	b.	Debit Cash $1,864,097; debit Discount on Bonds Payable $135,903; credit Bonds Payable $2,000,000.
	c.	Debit Cash $1,864,097; debit Interest Expense $135,903; credit Bonds Payable $2,000,000.
	d.	Debit Cash $1,864,097; credit Bonds Payable $1,864,097.

C- A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 95,000 the gain or loss on this retirement is:

	a.	$7,700 loss.
	b.	$2,700 gain.
	c.	$3,700 loss.
	d.	$7,700 gain.

D- Which one of the following is the correct statement about Bond retirement by conversion?

	a.	The bonds carrying value is transferred to equity and gain is recorded.
	b.	The bonds carrying value is transferred to cash and no gain is recorded.
	c.	The bonds carrying value is converted to cash and no gain or loss is recorded.
	d.	The bonds carrying value is converted to shares and no gain or loss is recorded.