On January 1, 2011, Steadman issues $250,000 of 10%, 12-year bonds at a price of
ID: 2381022 • Letter: O
Question
On January 1, 2011, Steadman issues $250,000 of 10%, 12-year bonds at a price of 97.50. Six years later, on January 1, 2017, Steadman retires 20% of these bonds by buying them on the open market at 104.50. All interest is accounted for and paid through December 31, 2016, the day before the purchase. The straight-line method is used to amortize any bond discount.
How much does the company receive when it issues the bonds on January 1, 2011?
On January 1, 2011, Steadman issues $250,000 of 10%, 12-year bonds at a price of 97.50. Six years later, on January 1, 2017, Steadman retires 20% of these bonds by buying them on the open market at 104.50. All interest is accounted for and paid through December 31, 2016, the day before the purchase. The straight-line method is used to amortize any bond discount.
How much does the company receive when it issues the bonds on January 1, 2011?
Explanation / Answer
Given Issue price = $97.50.Hence par value = $100
The company receive when it issues the bonds on January 1, 2011 = $243750
Working Note:
Issue Amount received = ($250000/100) x 97.5 = $243750
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