On December 31, Wintergreen, Inc. issued \$150,000 of 7% 10-year bonds at a price of 93.25. What amount of cash did Wintergreen, Inc. receive from the bond issuance?

• A. \$150,000
• B. \$93,250
• C. \$139,875
• D. \$104,625

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the problem. Wintergreen, Inc. issued bonds with a face value of \$150,000 at a price of 93.25. The price of 93.25 represents a percentage of the face value, meaning the bonds were issued at a discount. The goal is to calculate the cash received from the bond issuance.
2. Step 2: Convert the bond price percentage into a decimal. To do this, divide 93.25 by 100. This gives the decimal equivalent of the bond price.
3. Step 3: Multiply the face value of the bonds (\$150,000) by the decimal equivalent of the bond price (from Step 2). This calculation determines the cash received from the bond issuance.
4. Step 4: Verify the calculation by ensuring the result represents the discounted price of the bonds, which is less than the face value of \$150,000.
5. Step 5: Interpret the result. The cash received from the bond issuance is the amount Wintergreen, Inc. will record as proceeds from the sale of the bonds, which is less than the face value due to the discount.