A company issues 10-year bonds with a face value of $1,000,000, dated January 1, 2021 and bearing interest at an annual rate of 12% payable semiannually on January 1 and July 1. The full interest amount will be paid each due date. The market rate of interest on bonds of similar risk and maturity, with the same schedule of interest payments, is also 12%. If the bonds are issued on February 1, 2021, the amount the issuing company receives from the buyers of the bonds on that date is

1. 1,000,000
2. 990,000
3. 1,020,000
4. 1,010,000

On June 1, Year One, Braxton Company issues $100,000 in bonds payable with a stated annual interest rate of 9 percent at face value plus accrued interest. These bonds pay interest every February 1 and August 1. What amount does Braxton receive and what interest expense is recognized for Year One?

a.Braxton receives $101,500 and interest expense for Year One is recognized as $8,250

b.Braxton receives $103,000 and interest expense for Year One is recognized as $5,250

c.Braxton receives $103,000 and interest expense for Year One is recognized as $8,250

d.Braxton receives $101,500 and interest expense for Year One is recognized as $5,250