Which of the following statements are true?

1. If bonds were initially issued at a discount, the coupon rate of interest is more than the market rate of interest at the time of issue.

2. If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method, will increase as the bonds approach their maturity date.

3. Amortization of a premium causes the amount of interest expense to increase.

4. Cash interest payments on bonds equal interest expense on the income statement when there is amortization of a bond premium.

5. The result of using the effective interest method of amortization of a discount on bonds is that the effective interest rate for each amortization period is constant.

Group of answer choices

1, 2, 3, 4

2, 3, 5

3, 4, 5

2, 5

3, 4

On January 1, 2013, a corporation issued $500,000, 6%, 10-year bonds for $581,771. The bonds pay interest semi-annually on June 30 and December 31. The market rate of interest is 4%. Draw a table to prepare a bond amortization schedule and answer the following question. (Round your answers to the nearest $)

What is the total cost to borrow over the life of the bond?

Group of answer choices

$281,771

$118,229

$300,000

$381,771

$218,229

Red Corp issued $1,000,000, 5%, 10 years bonds with annual interest payments on January 1, 2012 when the market rate of interest was 7%. Which of the following statements is true?

1. At the end of 10 years, the amount of total interest expense on the bond issue will be $500,000.

2. The amount of premium or discount amortized each year is decreasing.

3. The cash interest payment is increasing each year of the bonds life.

4. The amount of interest expense recorded each year is decreasing over the life of the bond.

5. The carrying value of the bond is more than $1,000,000.

Group of answer choices

1, 4, 5

2, 3, 5

1, 2, 3, 4

2, 3, 4, 5

None of the above.