Information from the company's financial records is presented below:
At the end of 2014, the company issued notes at par value for $1,200,000 cash. The proceeds were used to retire the $1,000,000 note issue outstanding at the end of 2013 (before their maturity date). All interest expense was paid in cash during 2014.
-Refer to Medstar Ambulance Service. How much was paid to retire the $1,000,000 note issue during 2014?

Question

Information from the company's financial records is presented below:
  At the end of 2014, the company issued notes at par value for $1,200,000 cash. The proceeds were used to retire the $1,000,000 note issue outstanding at the end of 2013 (before their maturity date). All interest expense was paid in cash during 2014.
-Refer to Medstar Ambulance Service. How much was paid to retire the $1,000,000 note issue during 2014?

Quizplus · Accepted Answer

The company issued notes at par value for $1,200,000 and used the proceeds to retire the $1,000,000 note issue outstanding at the end of 2013. This means that the actual amount paid to retire the $1,000,000 note issue is the difference between the proceeds ($1,200,000) and the par value ($1,000,000), which is $200,000. Therefore, the correct answer is C) $1,045,000, which is obtained by adding the original par value ($1,000,000) and the actual amount paid to retire the note ($200,000), minus the interest expense paid during 2014 ($155,000).

Information from the Company's Financial Records Is Presented Below