Question

For each of the following situations, calculate the amount of bond discount or premium, if any. (Do not round your intermediate calculations.)

Gray Co. issued $60,000 of 6 percent bonds at 102 1/2

Answer 1

The bond premium for Gray Co.'s 6 percent bonds issued at 102 1/2 is $1,500

Step-by-step explanation:

When a bond is issued at a price higher than its face value, it is considered a bond premium. In this case, Gray Co. issued $60,000 of 6 percent bonds at 102 1/2, which means the bonds were issued at 102.5% of their face value. To calculate the bond premium, we need to find the difference between the issue price and the face value of the bonds:

Bond Premium = Issue Price - Face Value

Bond Premium = $60,000 × 102.5% - $60,000

Bond Premium = $61,500 - $60,000

Bond Premium = $1,500