Red & Blue Company sold bonds at 97 on an interest payment date for $500,000. Assuming the

Question:

Red & Blue Company sold bonds at 97 on an interest payment date for $500,000. Assuming the bonds will be retired in 10 years and interest is paid annually, calculate the amount of cash that will be received and paid by Red & Blue in the first year, as well as the interest expense that will be recognized in that year. The bonds carry a stated interest rate of 5 percent.