Megan, Inc., sold $500,000 of its 9%, five-year bonds dated January 1, 2016

14. Megan, Inc., sold $500,000 of its 9%, five-year bonds dated January 1, 2016, on May 1, 2016, for
$493,000 plus accrued interest. Interest is paid on January 1 and July 1 and straight-line amortization is
used. The net liability for the bonds after recording the sale would be
a. $508,000
b. $507,700
c. $500,000
d. $493,000

15.
Megan, Inc., sold $500,000 of its 9%, five-year bonds dated January 1, 2016, on May 1, 2016, for
$493,000 plus accrued interest. Interest is paid on January 1 and July 1 and straight-line amortization is
used. Interest expense after the July 1, 2016, interest payment has been posted is
a. $8,200
b. $7,750
c. $7,500
d. $6,800
Baron, Inc., issued $100,000 of its 8%, five-year bonds on January 1, 2014, at 98. Interest is paid on
January 1 and July 1. The bonds are callable at 103 and straight-line amortization is used. The bonds are
recalled on April 1, 2016. The journal entry to record the reacquisition of the bonds will include a
a. debit to Loss on Bond Redemption for $5,000
b. credit to Gain on Bond Redemption for $5,000
c. credit to Discount on Bonds Payable for $1,100
d. debit to Loss on Bond Redemption for $4,200