Question # 1 (Max. Marks=5= 2 +2+1) Information: Networks Corp., a hypothetical company, issues 4-year bonds of worth $10 million on 1-Jan-2000 when the market interest rate is 4% per annum. The bonds pay an annual coupon of 5% on 31- December for each year until maturity of the bonds. Required: (1) What are the sales proceeds of the bonds when issued? (2) How is the issuance of bonds reflected in the financial statements? (3) Is it a premium or discount bond? Why? Answer:

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