On February 28,2018,$5,000,000 of 6%,10-year bonds payable,dated December 31,2017,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 amount received by the issuing corporation is $5,060,000 which is higher than the face value of the bonds payable ($5,000,000). This means that the company received more cash than the amount of the bond liability. Therefore, the bonds were issued at a premium. Option B and Option C are incorrect because they provide specific amounts for the cash payment on the next interest date which cannot be determined with the information given. Option D is incorrect because the bonds were issued at a premium, not a discount.

On February 28,2018,$5,000,000 of 6%,10-Year Bonds Payable,dated December 31,2017,are Issued