Final answer:
The interest on the bond can be calculated using the effective interest method of amortization. Since the interest is negative, it means that the bond was sold at a discount. Therefore, the correct answer is 2) False.
Step-by-step explanation:
The interest on the bond can be calculated using the effective interest method of amortization. The effective interest method is used to allocate the interest expense over the life of a bond so that the interest expense recorded in each period reflects the effective yield of the bond. In this case, the bond was sold for $92,278 and has a face value of $100,000 with a stated interest rate of 8%. To find the interest, we need to calculate the difference between the cash received and the face value of the bond:
Interest = Cash Received - Face Value
Interest = $92,278 - $100,000
Interest = -$7,722
Since the interest is negative, it means that the bond was sold at a discount. This discount represents the difference between the face value of the bond and the amount it was sold for. Therefore, the correct answer is 2) False.