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?
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.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
fromChapter 8 / Lesson 7