On January 1, Guerin Company issues $300,000 of 10-year bonds with a stated rate of 8%. The market rate is 7%. Interest is paid annually.

The present value of 1 for 10 periods at 7% is .51 and at 8% is .46.

The present value of an ordinary annuity of 1 for 10 periods at 7% is 7.02 and at 8% is 6.71.

The selling price of the bonds can be computed as

a. (300,000 x .08 x 6.71) + (300,000 x .46)

b. (300,000 x .07 x 6.71) + (300,000 x .46)

c. (300,000 x .08 x 7.02) + (300,000 x .51)

d. (300,000 x .07 x 7.02) + (300,000 x .51)

$70,000 face value bonds are issued on January 1 for $73,115. On June 30, the interest paid is $1750, and interest expense is $1462.30. Which of the following is true?

a. The premium on June 30 is 3,115 287.70.

b. The effective rate is 1462.30/70,000.

c. The carrying value on June 30 is $73,115 + $287.70.

d. The stated rate is 1750/73,115.

The carrying value of $100,000 face value bonds at the end of the third year, December 31, is $96,454. The stated rate is 8%; the effective rate is 10%. Interest is payable semiannually. On

April 1, Year 4, the bonds are purchased on the market for $97,000 plus accrued interest. What is the gain or loss on retirement?

a. Loss of $546

b. Loss of $2135

c. Gain of $1865

d. Loss of $135

On January 1, Dave Company issued $80,000 of convertible bonds at 98. Each $1000 bond was convertible into 10 shares of $1 par value common stock. Three years later, the bonds were converted to common stock when the market price of the shares was $86 per share. At the time of conversion, the discount on bonds payable was $700. Which of the following is true at the time of the conversion?

a. The common stock is recorded at $68,800.

b. The APIC is recorded at $78,500

c. The APIC is recorded at $79,900

d The APIC is recorded at $11,900