Question

Return to question Required information The following information applies to the questions displayed below.] Alexi Co, issued $3.90 million face amount of 7%, 10 year bonds on June 1, 2019. The bonds pay interest on an annual basis on May 31 each year. Required: a. Assume that the market interest rates were slightly higher than 7% when the bonds were sold. Would the proceeds from the bond issue have been more than less than or equal to the face amount? Multiple Choice The bonds will sell for less than their face amount The bonds will soll for more than the face amount < 2 Prev 3 !!! of 6 Next > to search

Answer 1

Answer Page No 0 @ The bonds will sell for less than their face amount. Because The bonds issued at the discount of the market interest is higher than stated interest rate of bond this is due to the other bond in market are providing higher interest discount. . The In this case bords are bonds will. sell for less than issue at discount. their face amount Balance sheet Income statement stock Il Net 1 liabilities Assets Revenue expense tl-holders equity l income Cash $3540,000 Bonds $3900,000 payable Discount on bonds payable-$360,000 Discount on bonds payable = 3900,000 – 3540,000 = $360,000