Alexi Co. issued $2.50 million face amount of 8%, 10-year bonds on June 1, 2019. The bonds pay interest on an annual basis on May 31 each year.
Required:
a. Assume that the market interest rates were slightly higher than 9% when the bods were sold. Would the proceeds from the bond issue have been more than, less than, or equal to the face amount? Explain
b. Independent of your answer to part a, assume that the proceeds were $2,134,000. Use the horizontal model to show the effect of issuing the bonds. Indicate the financial statement effect. (Enter your answers in whole dollars, not in millions. Enter decreases with a minus sign to indicate a negative financial statement effect.)
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