On January 1, 2021, Husker Company issued 2,000 bonds of its 5-year, $1,000 face value, 11% bonds dated January 1 at an effective annual interest rate (yield) of 9%. On December 31^st, Husker extinguished the 2,000 bonds early through acquisition in the open market for $1,980,000.

1. Were the bonds issued at face value, at a discount, or at a premium? Why?

2. Is the amount of interest expense for the bonds using the effective interest method of amortization higher in the first year or second year of the life of the bond issue? Why?

3. Is the amount of interest expense higher or lower than the cash paid out for interest?

4. How is a gain or loss on early extinguishment of debt determined? (Do not need to compute actual number).

5. Does the early extinguishment of the bonds result in a gain or loss? Why?