On January 1, 2010, Wolf Corp. issued 1,000 of its 8%, $1,000 bonds for $1,050,0

Question

On January 1, 2010, Wolf Corp. issued 1,000 of its 8%, $1,000 bonds for $1,050,000. These bonds were to mature on January 1, 2020, but were callable at 102 any time after December 31, 2012. Interest was payable semiannually on July 1 and January 1. On July 1, 2014, Wolf called all the bonds and retired them. Bond premium was amortized on a straight-line basis. How much cash did Wolf pay to the bondholders when Wolf called the bonds?

$1,000,000

$1,020,000

$1,050,000

None of the above.

$1,000,000

$1,020,000

$1,050,000

None of the above.

Explanation / Answer

As the bonds were callable at 102% per bond after 2012

So on july 1 ,2014 the bonds will retire at 102% *1000= $1,020per bond

So total amoun of cash wolf would pay = Price at retire * number of bonds = $1,020 * 1000 = $1,020,000

So the correct option is B

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