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A $4,000, 2%, 10-year bond at 96 held to maturity. Straight line method of amortization is used...

Question:

A $4,000, 2%, 10-year bond at 96 held to maturity. Straight line method of amortization is used for both premiums & discounts. What is the net cash received over the life of the bond investment?

Bond Payable:

The bond payable is issued in an open market for raising funds. It used to satisfy the financial need for the company. Bond payable pays periodic interest and the maturity value of the bond payable.

Answer and Explanation:

The net cash received over the life of the bond investment is $960.

Explanation: The net cash received over the life of the bond investment is $960 ($4,000 + $4,000 x 2% x 10 - $4,000 x 96%), which has been obtained by deducting the cash invested from the sum of the total interest receivable over the life of bond and the maturity value of bond.


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Long-Term Debt: Definition, Cost & Formula

from Financial Accounting: Help and Review

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