On 28 February 2014, $5,000,000 of 6%, 10-year bonds payable, dated 31 December 2013, are issued. Interest on the bonds is payable semiannually each 30 June and 31 December. 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). This means that the bonds were issued at a premium (i.e. for more than their face value). The amount of cash paid to bondholders on the next interest date, 30 June 2014, cannot be determined from the information given.

On 28 February 2014, $5,000,000 of 6%, 10-Year Bonds Payable