A $100,000 5-Year 6% Bond Is Issued on January 1

question 10

Multiple Choice

A $100,000 5-year 6% bond is issued on January 1, 2020. The bond pays interest annually. The market rate is 7%. What is the discount or premium of the sale of the bonds, rounded to nearest dollar?

• A)$4,100 discount
• B)$4,100 premium
• C)$95,900 discount
• D)$100,000 premium

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Definitions:

Prepaid Expenses

Costs paid in advance of their use, such as insurance or rent, which are recorded as assets on a balance sheet until they are actually incurred.

Recorded

The process of documenting financial transactions in the accounting records of a business.

Adjusted Trial Balance

A trial balance taken after adjustments have been made, used for preparing financial statements.

Accounts Payable

Money owed by a company to its suppliers or creditors for goods and services received.