On September 1,2016,Blue Co. ,issued $1,600,000 of its 10% bonds at 98 plus accrued interest.The bonds are dated June 1,2016,and mature on May 30,2026.Interest is payable semiannually on June 1 and December 1.At the time of issuance,Blue would receive cash of:

Question

Quizplus · Accepted Answer

The cash received by Blue Co. at the time of issuance can be calculated as follows:

Total proceeds = Face value * Issue price + Accrued interest
Total proceeds = $1,600,000 * 0.98 + ($1,600,000 * 0.1 * 3/12)
Total proceeds = $1,568,000 + $40,000
Total proceeds = $1,608,000

Therefore, the best choice is B.