Test 2 Principles of Accounting II (Chapters 14 and 15) I. On January 1 Trojan Co. issued a $600,000, 10%, 10-year bond that pays semi-annual interest of $30,000 ($600,000 x 10% x i/2), receiving cash of $625,000. The entry to record the issuance of the bonds is: A. Dr. Cash 625,000 Cr. Premium 25,000 Cr. Bonds Payable 600,000 B. Dr. Bonds Payable 600,000 Dr. Discount 25,000 Cr. Cash 625,000 C. Dr. Cash 625,000 Cr. Gain 25,000 Cr. Bonds Payable 600,000 D. Dr. Bonds Payable 600,000 Dr. Loss 25,000 Cr. Cash 630,000 A $525,000 bond issue on which there is an namortized discount of $40,000 is redeemed for $475,000. The entry to record the redemption of the bonds is: 2. A. Dr. Discount 40,000 Dr. Loss 10,000 Dr. Cash 475,000 Cr. Bonds Payable 525,000 B. Dr. Bonds Payable 525,000 Cr. Gain 50,000 Cr. Cash 475,000 C. Dr. Loss 50,000 Dr. Cash 475,000 Cr. Bonds Payable 525,000 D. Dr. Bonds Payable 525,000 Cr. Discount 40,000 Cr. Gain 10,000 Cr. Cash 475,000 3. The balance in Premium on Bonds Payable: A. Should be reported on the balance sheet as a deduction from the related bonds payable. B. Should be allocated to the remaining periods for the life of the bonds by the straight-line method, if the results obtained by that method materially differ from the results that would be obtained by the interest method. C. Would be added to the related bonds payable on the balance sheet. D. Should be reported in the paid-in capital section of the balance sheet