On September 30, 2019, Arana Corporation issued $2,500,000 of 10-year, 12% bonds at 97. What is the amount of discount or premium?

Question

Quizplus · Accepted Answer

The bonds were issued at 97, which means they were issued at 97% of their face value. The face value is $2,500,000, so the issue price is 97% of that, or $2,500,000 * 0.97 = $2,425,000. The difference between the face value ($2,500,000) and the issue price ($2,425,000) is $75,000, which is a discount because the bonds were sold for less than their face value.

On September 30, 2019, Arana Corporation Issued $2,500,000 of 10-Year