# CMA Study Group

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## CMA part 2 bonds

• #### 1.  CMA part 2 bonds

Posted 27 days ago

can someone help explaining this answer

On January 1, Year 2, Oak Co. issued 400 of its 8%, \$1,000 bonds at 97 plus accrued interest. The bonds are dated October 1, Year 1, and mature on October 1, Year 11. Interest is payable semiannually on April 1 and October 1. Accrued interest for the period October 1, Year 1, to January 1, Year 2, amounted to \$8,000. On January 1, Year 2, what amount should Oak report as bonds payable, net of discount?
 A. \$380,300 B. \$388,300 C. \$392,000 D. \$388,000 Answer (D) is correct.A bond issued "at 97" is issued at a price equal to 97% of its face amount (400 bonds × \$1,000 face amount × .97 = \$388,000). At the issue date, no time has passed, so no amortization has occurred, and the accrued interest is credited to either interest payable or interest expense. The reported amount is therefore \$388,000 (\$400,000 – \$12,000).

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Tayba Al-Mehdar
Analyst
Khobar
Saudi Arabia
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• #### 2.  RE: CMA part 2 bonds

Posted 27 days ago

Hi Tayba

Note: Bonds are issued and trade in increments of \$1,000 face, or par, value. They are quoted at
their price per \$100 of face value. Therefore, if a bond is quoted on the secondary market at a price of
101, the bond costs \$101 per \$100 of face value, or 101% of the total face value. A \$1,000 bond quoted
at 101 would sell for 101% of \$1,000, or \$1,010.

Here in the question 400 bonds issued at 97 so this means 400X1000X.97= 388,000

12000/- is interest on bonds and question is bond value on Jan 1 and Y2 and bond is issued also on Jan 1 Year 2 so 388,000 will be value reported as bond payable.

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