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CPA Accountant Review Questions

Category - Accounting

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If $5,000,000 in 7% bonds are issued at 104 ½, how much cash is generated from the sale?

$1,040,000
$1,000,000
$5,000,000
$5,225,000
$3,500,000

Explanation

Answer: D - The cash generated by the sale of the bond is $5,225,000.

5,000,000 x 1.045 = 5,225,000

Key Takeaway: The bonds being issued at 104 ½ means that the bonds sold for 4.5% more than the face value.

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