What was the purchase price of the Bush Corporation bonds bought by Robinson Company?

Determining the correct purchase price of the Bush Corporation bonds requires an understanding of how bond pricing works in the context of financial accounting. When bonds are issued, they may not always be sold at face value. Instead, they can be purchased at a premium (above face value) or a discount (below face value) based on the market conditions and the bond's coupon rate compared to current interest rates.

In this case, the purchase price of $92,278 suggests that the bonds were bought at a discount. This could be due to the market interest rates being higher than the coupon rate offered by the Bush Corporation bonds at the time of purchase.

The price of $92,278 indicates the present value of the future cash flows from the bonds, which includes both the interest payments and the principal amount at maturity, discounted at the market rate of interest. This price reflects the value that Robinson Company placed on these bonds when considering the financial metrics and risk factors involved.

Understanding how to evaluate bonds, based on present value calculations and market conditions, is crucial in financial accounting, particularly when recording investments to ensure the financial statements accurately reflect the company’s position regarding its investments.