On 1 April, year 1, Greenway Corporation issues $20 million of 10%, 20-year bonds payable at par. Interest on the bonds is payable semiannually each 1 April and 1 October.
-With respect to this bond issue, Greenway's statement of financial position at 31 December, Year 1, will include:

Question

Quizplus · Accepted Answer

The bond issue is for $20 million, but since it was issued at a discount of 2.5%, the actual proceeds received would be $19.5 million. Therefore, the bonds payable would be $20 million but the net amount received would be $19.5 million. Also, since the bonds were issued in Year 1, there would not be any interest expense recognized yet, only interest payable of $500,000 (2.5% of $20 million) which would be recorded on the statement of financial position. Therefore, option D is the correct answer.

On 1 April, Year 1, Greenway Corporation Issues $20 Million