Accounting 26th Edition by Carl Warren,James Reeve,Jonathan Duchac

Exercise 6

A corporation issues $26,000,000 of 9% bonds to yield interest at the rate of 7%. (a) Was the amount of cash received from the sale of the bonds greater or less than $26,000,000 (b) Identify the following amounts as they relate to the bond issue: (1) face amount, (2) market or effective rate of interest, (3) contract rate of interest, and (4) maturity amount.