Herman Company Received Proceeds of ₤471,250 on 10-Year, 8% Bonds

question 236

Multiple Choice

Herman Company received proceeds of ₤471,250 on 10-year, 8% bonds issued on January 1, 2015. The bonds had a face value of ₤500,000, pay interest semi-annually on June 30 and December 31, and have a call price of 101. Herman uses the straight-line method of amortization.
Herman Company decided to redeem the bonds on January 1, 2017. What amount of gain or loss would Herman report on its 2017 income statement?

• A)₤23,000 gain
• B)₤28,000 gain
• C)₤28,000 loss
• D)₤23,000 loss

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Definitions:

Conditioning

A process of behavioral modification where a response becomes more frequent or predictable in a given environment due to reinforcement or association with a stimulus.

Metronome

A device used by musicians to mark time at a selected rate by giving a regular tick sound at adjustable intervals.

Biscuit

A small baked product that varies in texture and flavor across different cultures, typically soft and flaky in the USA and crunchy in the UK.

Conditioned Response

The learned response to a previously neutral stimulus after it has been paired repeatedly with an unconditioned stimulus.