On February 28, 2011, $5,000,000 of 6%, 10-year bonds payable, dated December 31, 2010, are issued. Interest on the bonds is payable semiannually each June 30 and December 31. If the total amount received (including accrued interest) by the issuing corporation is $5,060,000, which of the following is correct?

Question

Quizplus · Accepted Answer

The total amount received by the issuing corporation ($5,060,000) is greater than the face value of the bonds ($5,000,000), indicating that the bonds were issued at a premium. The premium is calculated by subtracting the face value of the bonds from the total amount received, which in this case is $60,000 ($5,060,000 - $5,000,000). Therefore, choice A is correct. The amount of cash paid to bondholders on the next interest date cannot be determined solely from the information given, so choices B and C are incorrect. Choice D is also incorrect because the bond price is above par, indicating a premium.

On February 28, 2011, $5,000,000 of 6%, 10-Year Bonds Payable