Question 1:
For each of the following independent situations, determine (1) whether the bonds sold at face value, a premium, or at a discount, and (2) whether interest expense recognized each year for the bonds was less than, equal to, or greater than the amount of interest paid on the bonds.
a. Bonds with a stated rate of 10 percent were sold to yield an effective rate of 8 percent.
b. Bonds with a stated rate of 7 percent were sold to yield an effective rate of 7 percent.
c. Bonds with a stated rate of 6 percent were sold to yield an effective rate of 11 percent.