On January 1, 2009, Seldon issues $450,000 of 10%, 15-year bonds at a price of 9

Question

On January 1, 2009, Seldon issues $450,000 of 10%, 15-year bonds at a price of 93¼. Six years later, on January 1, 2015, Seldon retires 20% of these bonds by buying them on the open market at 109¾. All interest is accounted for and paid through December 31, 2014, the day before the purchase. The straight-line method is used to amortize any bond discount.

How much does the company receive when it issues the bonds on January 1, 2009?


What is the amount of the discount on the bonds at January 1, 2009?

Explanation / Answer

Note: 931/4 assumed as 93.25% Received amount: Company issued $450000 of bonds on 93.25% of amount Received amount = 450000 * 93.25% = 419625 Discount amount: Discount amount = 450000 * 6.75% = 30375 (OR) = 450000 - 419625 = 30375 Thank you.... Received amount = 450000 * 93.25% = 419625

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