On January 1,2011,Alpha Company issued $1,000,000 of 5%,20-year bonds to buy a new computerized accounting system.The market rate of interest was 6%.The bonds pay interest annually on December 31.On its balance sheet at December 31,2011,Alpha will show bonds payable of $1,000,000 ________.

Question

Quizplus · Accepted Answer

Since the market rate of interest (6%) was higher than the coupon rate (5%), the bonds would have been issued at a discount. Therefore, on the balance sheet, the bonds payable will be shown minus the unamortized discount.

On January 1,2011,Alpha Company Issued $1,000,000 of 5%,20-Year Bonds to Buy