Annapolis Company purchased a $1,000, 8%, 10-year bond at 95 and held it to maturity

Accounting Sep 05, 2020

Annapolis Company purchased a $1,000, 8%, 10-year bond at 95 and held it to maturity. The straight line method of amortization is used for both premiums & discounts. What is the net cash received over the life of the bond investment? (all money received minus all money paid, round to nearest whole dollar)

Expert Solution

Computation of the net cash received over the life of the bond investment:-

Net cash received = Total interest received + Cash received at maturity - Cash paid for purchase

= ($1,000*8%*10) + $1,000 - ($1,000*95%)

= $800 + $1,000 - $950

= $850

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