What amount did Robinson Company pay for the Bush Corporation bonds?

To determine the amount Robinson Company paid for the Bush Corporation bonds, the answer of $92,278 suggests that the bonds were likely purchased at a discount. This situation often occurs when the stated interest rate (coupon rate) of the bonds is lower than the prevailing market interest rates at the time of the sale.

When bonds are issued at a discount, investors will pay less than the face value for the bonds, such as in this case with a purchase price under $100,000. The discount reflects the present value of the future cash flows (interest payments and the principal repayment at maturity) calculated using the market rate of interest. Consequently, the discounted price compensates for the lower interest revenue that the bondholder will receive compared to the market rate.

This concept is essential for understanding bond valuation, as the price of bonds in the market is influenced by interest rates and investor demand, which can lead to buying bonds for less than their face value, resulting in the specific amount determined in the scenario.