question archive On April 1, 2018, Greg Company issued at 99 plus accrued interest, 2,000 of 8% P1,000 face value bonds
On April 1, 2018, Greg Company issued at 99 plus accrued interest, 2,000 of 8% P1,000 face value bonds
Subject:AccountingPrice:2.87 Bought7
On April 1, 2018, Greg Company issued at 99 plus accrued interest, 2,000 of 8% P1,000 face value bonds. The bonds are dated January 1, 2018, mature on January 1, 2028, and pay interest on January 1 and July 1. The entity paid bond issue cost of P70,000.
From the bond issuance, what is the net cash received?
a. 2,020,000
b. 1,980,000
c. 1,950,000
d. 1,910,000
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Answer:
c .
Step-by-Step explanation
C is the correct answer.
Accrued interest = Face value x interest rate x time = (2000 x 1000) x 8% x 3/12 = 40,000
Price of the bond = Face value x issued price in % = (2,000 x 1000) x 99% = 1,980,000
Net proceeds = Price + Accrued interest - Bond issued costs
Net proceeds = 1,980,000 + 40,000 - 70,000
Net proceeds = 1,950,000
