Chang Corporation issued $6,000,000 of 9%, ten-year convertible bonds on July 1, 2017 at 96.1 plus accrued interest. The bonds were dated April 1, 2017 with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basis. On April 1, 2018, $1,200,000 of these bonds were converted into 500 shares of $20 par value common stock. Accrued interest was paid in cash at the time of conversion.

1. What was the effective interest rate on the bonds when they were issued?

• 9%
• Above 9%
• Below 9%
• Cannot determine from the information given.

2. What should be the amount of the unamortized bond discount on April 1, 2018 relating to the bonds converted?

• $46,800.
• $43,200.
• $23,400.
• $44,400.


3. If "interest payable" were credited when the bonds were issued, what should be the amount of the debit to "interest expense" on October 1, 2017?

• $129,000.
• $135,000.
• $141,000.
• $270,000