Use the following information for questions.issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31.The bonds were sold to yield 8%.Table values are:
-Farmer Company issues $10,000,000 of 10-year, 9% bonds on March 1, 2010 at 97 plus accrued interest.The bonds are dated January 1, 2010, and pay interest on June 30 and December 31.What is the total cash received on the issue date?

Question

Use the following information for questions.issued eight-year bonds with a face value of $1,000,000 and a stated interest rate of 6%, payable semiannually on June 30 and December 31.The bonds were sold to yield 8%.Table values are: 
-Farmer Company issues $10,000,000 of 10-year, 9% bonds on March 1, 2010 at 97 plus accrued interest.The bonds are dated January 1, 2010, and pay interest on June 30 and December 31.What is the total cash received on the issue date?

Quizplus · Accepted Answer

The bonds are issued at 97, which means 97% of the face value, so $10,000,000 * 0.97 = $9,700,000. Additionally, accrued interest from January 1 to March 1 (2 months) is $10,000,000 * 9% * (2/12) = $150,000. Total cash received is $9,700,000 + $150,000 = $9,850,000.

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