Question 1:

A:

The 10% bonds payable of Marigold Corp. had a carrying amount of $4210000 on December 31, 2020. The bonds, which had a face value of $4050000, were issued at a premium to yield 8%. Marigold uses the effective-interest method of amortization. Interest is paid on June 30 and December 31. On June 30, 2021, several years before their maturity, Marigold retired the bonds at 104 plus accrued interest. The loss on retirement, ignoring taxes, is

$36100.

$53700.

$0.

$162000.

B:

On January 1, 2021, Concord Corporation sold property to Pharoah Company. There was no established exchange price for the property, and Pharoah gave Concord a $4300000 zero-interest-bearing note payable in 5 equal annual installments of $860000, with the first payment due December 31, 2021. The prevailing rate of interest for a note of this type is 9%. The present value of the note at 9% was $3345142 at January 1, 2021. What should be the balance of the Discount on Notes Payable account on the books of Pharoah at December 31, 2021 after adjusting entries are made, assuming that the effective-interest method is used?

$681552.

$0.

$653795.

$954858.