On July 1, Somers Inc. issued $200,000 of 10 %, 10-year bonds when the market rate was 12%. The bonds paid interest semi-annually. A. Assuming the bonds sold at 59.55, what was the selling price of the bonds? B. Explain why the cash received from selling this bond is different from the $200,000 face value of the bond. ✔ in other similar bonds so the bond sells at a discount Investors can earn a higher rate

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On July 1, Somers Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12 %. The bonds paid interest semi-annually.
A. Assuming the bonds sold at 59.55, what was the selling price of the bonds?
B. Explain why the cash received from selling this bond is different from the $200,000 face value of the bond.
Investors can earn a higher rate
✓ in other similar bonds so the bond sells at a discount
Transcribed Image Text:On July 1, Somers Inc. issued $200,000 of 10%, 10-year bonds when the market rate was 12 %. The bonds paid interest semi-annually. A. Assuming the bonds sold at 59.55, what was the selling price of the bonds? B. Explain why the cash received from selling this bond is different from the $200,000 face value of the bond. Investors can earn a higher rate ✓ in other similar bonds so the bond sells at a discount
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