Herman Company Received Proceeds of ₤565,500 on 10-Year, 8% Bonds

question 237

Multiple Choice

Herman Company received proceeds of ₤565,500 on 10-year, 8% bonds issued on January 1, 2012. The bonds had a face value of ₤600,000, 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, 2014. What amount of gain or loss would Herman report on its 2014 income statement?

• A) ₤27,600 gain
• B) ₤33,600 gain
• C) ₤33,600 loss
• D) ₤27,600 loss

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Definitions:

Semimembranosus

One of the three hamstring muscles located at the back of the thigh, important for thigh extension and knee flexion.

Pronator Teres

A muscle in the forearm that helps in pronating the wrist, turning the hand so the palm faces downwards or backwards.

Buccinator

A muscle of the cheek that plays a significant role in the action of chewing and assists in manipulating food in the mouth.

Supinator

A muscle in the forearm that rotates the forearm and hand outward, as in turning the palm up.