Question

On December 31, 20X5. Cobb issued 2,000 of its 10%, $1,000 bonds at 99. The issuance price established a bond discount of $20,000. In connection with the sale of these bonds. Cobb paid the following expenses:

Legal and accounting fees $45,000
Printing of the prospectus 55,000
Underwriting fees 85,000
In Cobb's December 31, 20X5, balance sheet, bond issue costs total
a. $120,000.
b. $130,000.
c. $160,000.
d. $185,000.

Answer 1

D. $185,000

Step-by-step explanation:

Issuance costs are incurred to use the bond for a particular or specific year. Bond issuance costs are as follows:

Legal fees, accounting fees, underwriting fees, subscription fees, etc. In this case, all the costs are related to facilitating the use of bonds. Therefore, the bond issuance costs are -

Legal and accounting fees $45,000

Printing of the prospectus $55,000

Underwriting fees $85,000

Total costs $185,000