Feller Company issues $15,000,000 of 10-year, 9% bonds on March 1, 2014 at 97 plus accrued interest. The bonds are dated January 1, 2014, and pay interest on June 30 and December 31. What is the total cash received on the issue date?

Question

Quizplus · Accepted Answer

The total cash received is calculated by considering the issue price at 97% of the face value plus the accrued interest for two months (January and February). The face value is $15,000,000, so at 97%, the cash received from the sale is $15,000,000 * 0.97 = $14,550,000. The accrued interest for two months (9% annual rate) is $15,000,000 * 9% * (2/12) = $225,000. Therefore, the total cash received is $14,550,000 + $225,000 = $14,775,000.

Feller Company Issues $15,000,000 of 10-Year, 9% Bonds on March