On January 1, 2021, Yellow Company issued a 4% $100,000 bond for $92,000. The market rate for a bond of this type is 6%. The bond pays interest semi-annually on June 30 and December 31. The bond is a 5-year bond.

1. 7) On January 1, 2015, Red Company issued an 8% callable bond which has a par value of $100,000 for $90,000. The bond is callable at 105 any time after January 1, 2020. The entire bond was called back on January 1, 2021 when the unamortized discount had a balance of $1,500. Compute the amount of the gain or loss when the bond was retired on January 1, 2021.

1. 8) A company uses the effective interest method of amortization for a bond issued as a premium. In the early years of the life of the bond, the interest expense will be less than the interest paid. In the later years of the bonds life, the interest expense will be greater than the interest paid. (True/False)

1. 9) A bond was issued on March 1, 2021. The interest dates of the bond are February 1 and August 1. The number of total months of interest expense incurred for the year ended December 31, 2021 should be?