The company with the lowest balance in a contra account (Bonds Discounts) is A Company 2, which sold their bonds at 94.
Data and Calculations:
Co. 1 Co. 2 Co. 3 Co. 4
Face value of bonds $6,000,000 $6,000,000 $6,000,000 $6,000,000
Selling rate 99 94 101 105
Proceeds from bonds $5,940,000 $5,640,000 $6,060,000 $6,300,000
Premium / (Discounts) ($60,000) ($360,000) $60,000 $300,000
Company 1's balance in the contra account (Bonds Discounts) is $60,000, Company 3's is $60,000 (Bonds Premium), while Company 4's balance is $300,000 (Bonds Premium).
Thus, the company with the lowest balance in a contra account is A.
Options:
A. Company 2, which sold their bonds at 94
B. Company 4, which sold their bonds at 105
C. Company 1, which sold their bonds at 99
D. Company 3, which sold their bonds at 101
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