Q5SE_2
Question
Determining bond amounts
Savvy Drive-Ins borrowed money by issuing $3,500,000 of 9% bonds payable
at 99.5. Interest is paid semiannually.
Requirements
1. How much cash did Savvy receive when it issued the bonds payable?
2. How much must Savvy pay back at maturity?
3. How much cash interest will Savvy pay each six months?
Step-by-Step Solution
Verified Answer
Answer:
Savvy paid $3,500,000 at maturity.
1Step 1: Definition of bond payable
Bond payable is known as a type of liability account. It contains the amount owed by the bond issuer.
2Step 2: Amount receive on maturity
Savvy has to pay the amount equal to the face value of the bond. Hence, the amount Savvy must pay is $3,500,000.
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