Auerbach Inc. issued 4% bonds on October 1, 2016. The bonds have a maturity date

Question

Auerbach Inc. issued 4% bonds on October 1, 2016. The bonds have a maturity date of September 30, 2026 and a face value of $310 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2017. The effective interest rate established by the market was 6%. Assuming that Auerbach issued the bonds for $267,870,000, what would the company report for its net bond liability balance after its first interest payment on March 31, 2017? rev: 02_03_2016_QC_CS-39523, 02_03_2016_QC_CS-39523, 03_16_2016_QC_CS-45263, 03_17_2016_QC_CS-45263 $267,870,000. $266,033,900. $269,706,100. $271,542,200.

Explanation / Answer

Discount amortization in first interest payment =(267870000*6%/2)-(310000000*4%/2)= 1836100 Net bond liability balance after its first interest payment = 267870000+1836100= 269706100

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