Rate of interest paid on other bonds of equal risk

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Reference no: EM131859896

1. True or False: If the stated rate of interest of a bond is higher than the rate of interest paid on other bonds of equal risk, the bond will sell for more than face value. This statement is

2. On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were issued at 104 resulting in a 4% premium. They had a 20 year term and a stated rate of interest of 7%. Based on this information the carrying value of the bond liability on January 1, Year 1 is

A. 52,000

B. 50,000

C. 48,000

D. 46,500

3. On January 1, Year 1 Residence Company issued bonds with a $50,000 face value. The bonds were issued at 104 resulting in a 4% premium. They had a 20 year term and a stated rate of interest of 7%. Assuming a straight-line amortization of the discount, the amount of interest expense recognized on the December 31, Year 1 income statement is

A. 5,500

B. 3,400

C. 3,500

D. 3,600

Reference no: EM131859896

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