Auerbach Inc. issued 6% bonds on October 1, 2016. The bonds have a maturity date
ID: 2597894 • Letter: A
Question
Auerbach Inc. issued 6% bonds on October 1, 2016. The bonds have a maturity date of September 30, 2026 and a face value of $400 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2017. The effective interest rate established by the market was 8%.
Assuming that Auerbach issued the bonds for $345,636,000, what would the company report for its net bond liability balance at December 31, 2016, rounded to the nearest thousand?
Auerbach Inc. issued 6% bonds on October 1, 2016. The bonds have a maturity date of September 30, 2026 and a face value of $400 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2017. The effective interest rate established by the market was 8%.
Assuming that Auerbach issued the bonds for $345,636,000, what would the company report for its net bond liability balance at December 31, 2016, rounded to the nearest thousand?
Explanation / Answer
Beginning liability of bonds = $345,636,000
Add: interest accrued for three months = $6,000,000
($400 million x 6% x 3/12)
Net bond liability at December 31, 2016 = $351,636,000
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