Reference no: EM132462316

Question 1 - On January 1, 2008, a company issued $500,000, 5-year, 12% bonds with interest payable on July 1 and January 1 for $538,601. The market rate of interest at the time the bond was issued was 10%. The July 1, 2008 entry to record payment of bond interest and the amortization of the bond premium will include a:

a. Debit to interest expense, $64,632

b. Debit to interest expense, $53,860

c. Debit to interest expense, $26,930

d. Debit to interest expense, $32,316

Question 2 - On January 1, 2018, a company issued $500,000, 5-year, 12% bonds with interest payable on July 1 and January 1 for $538,601. The market rate of interest at the time the bond was issued was 10%. The January 1, 2019 (second interest payment) entry to record payment of bond interest and the amortization of the bond premium will include a:

a. Debit to interest expense, $26,777

b. Debit to interest expense, $32,132

c. Debit to interest expense, $26,930

d. Debit to interest expense, $32,316

Question 3 - On January 1, 2014, a company purchased and financed a luxurious boutique hotel on Nantucket for $37,908,000. The note agreement requires $10 million in annual payments starting on December 31, 2014 and continuing for a total of four more years (final payment December 31, 2018). The company's incremental borrowing rate is 10%. How much is the 2015 interest expense?

a. $4,000,000.

b. $10,000,000.

c. $3,169,880.

d. $3,790,800.