On May 1, 2013, Legacy Corporation sold $250,000 of its 15%, five-year bonds dated January 1, 2013, for 100 plus accrued interest. How much cash was received?

Question

Quizplus · Accepted Answer

The cash received is the face value of the bonds plus the accrued interest for four months (from January 1 to May 1). The interest for one year is 15% of $250,000, which equals $37,500. For four months, this is $37,500 * (4/12) = $12,500. Therefore, the total cash received is $250,000 + $12,500 = $262,500.

On May 1, 2013, Legacy Corporation Sold $250,000 of Its