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Adonis Corporation issued 10-year, 7% bonds with a par value of $130,000. Interest is paid semiannually....

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Accounting

Adonis Corporation issued 10-year, 7% bonds with a par value of$130,000. Interest is paid semiannually. The market rate on theissue date was 6%. Adonis received $139,674 in cash proceeds. Whichof the following statements is true?

  • Adonis must pay $139,674 at maturity plus 20 interest paymentsof $4,550 each.

  • Adonis must pay $130,000 at maturity plus 20 interest paymentsof $4,550 each.

  • Adonis must pay $130,000 at maturity plus 20 interest paymentsof $3,900 each.

  • Adonis must pay $139,674 at maturity and no interestpayments.

  • Adonis must pay $130,000 at maturity and no interestpayments.

Answer & Explanation Solved by verified expert
3.6 Ratings (305 Votes)
Answer 2nd option Since the market interest rate 6 is lower than the stated interest rate 7 the bond is issued at premium Premium    See Answer
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