Use the information below for Fargo Corp.for 2013 and 2014 to answer the following question. At the end of 2014,Fargo issued bonds at par value for $800,000 cash.The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2013 (before their maturity date).All interest expense was paid in cash during 2014.
How much did Fargo pay to retire the $500,000 bond issue during 2014?

Question

Use the information below for Fargo Corp.for 2013 and 2014 to answer the following question.  At the end of 2014,Fargo issued bonds at par value for $800,000 cash.The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2013 (before their maturity date).All interest expense was paid in cash during 2014.
How much did Fargo pay to retire the $500,000 bond issue during 2014?

Quizplus · Accepted Answer

- The company issued new bonds worth $800,000 and used the proceeds to retire the $500,000 bond issue outstanding at the end of 2013.
- This means that Fargo used $500,000 of the $800,000 to retire the old bonds, leaving $300,000 for other purposes.
- We are not given any information about the amount of interest paid or the interest rate on the old bonds, so we cannot use this to calculate the total cost of retiring them.
- Therefore, the most reasonable answer choice is C) $515,000, which represents the par value of the old bonds plus any premium or call premium that may have been included in the terms of the old bonds.

Use the Information Below for Fargo Corp