On January 1, a company issues bonds dated January 1 with a par value of $340,000. The bonds mature in 3 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 10%. Using the present value factors below, the issue (selling) price of the bonds is:

n=		i=			Present Value of an Annuity			Present value of $1
3		9.0	%			2.5313		0.7722
6		4.5	%			5.1579		0.7679
3		10.0	%			2.4869		0.7513
6		5.0	%			5.0757		0.7462

Multiple Choice

$340,000.

$253,708.

$331,366.

$77,658.

$348,634.

On January 1, a company issued and sold a $330,000, 4%, 10-year bond payable, and received proceeds of $323,000. Interest is payable each June 30 and December 31. The company uses the straight-line method to amortize the discount. The carrying value of the bonds immediately after the first interest payment is:

Multiple Choice

$322,650.

$323,350.

$330,000.

$329,650.

$330,350.

On January 1, a company issues bonds dated January 1 with a par value of $450,000. The bonds mature in 5 years. The contract rate is 10%, and interest is paid semiannually on June 30 and December 31. The market rate is 11% and the bonds are sold for $433,026. The journal entry to record the second interest payment using the effective interest method of amortization is:

Multiple Choice

Debit Interest Expense $23,816.43; credit Discount on Bonds Payable $1,316.43; credit Cash $22,500.00.

Debit Interest Payable $22,500.00; credit Cash $22,500.00.

Debit Interest Expense $21,183.57; debit Discount on Bonds Payable $1,316.43; credit Cash $22,500.00.

Debit Interest Expense $21,183.57; debit Premium on Bonds Payable $1,316.43; credit Cash $22,500.00.

Debit Interest Expense $23,888.83; credit Discount on Bonds Payable $1,388.83; credit Cash $22,500.00.