QUESTION

# Porter Company received proceeds of \$211,500 on 10-year, 8% bonds issued on January 1, 2006.

Porter Company received proceeds of \$211,500 on 10-year, 8% bonds issued on January 1, 2006. The bonds had a face value of \$200,000, pay interest annually on December 31st, and have a call price of 102. Porter uses the straight-line method of amortization.

What is the amount of interest Porter must pay the bondholders in 2006?

a. \$16,920

b. \$16,000

c. \$16,320

d. \$1,692

*182. What is the amount of interest expense Porter will show with relation to these bonds for the year ended December 31, 2007?

a. \$16,000

b. \$16,920

c. \$14,850

d. \$12,550

* What is the carrying value of the bonds on January 1, 2008?

a. \$200,000

b. \$209,200

c. \$190,800

d. \$210,350

184. Porter Company decided to redeem the bonds on January 1, 2008. What amount of gain or loss would Porter report on their 2008 income statement?

a. \$9,200 gain

b. \$5,200 gain

c. \$5,200 loss

d. \$9,200 loss

Amount of interest === Face value * rate200000 * 8%16000 Interest expense in 2007Amount of interest =Face value * rate=200000 * 8%=16000Less: Amortization of premium = 11500 /10=1150...