The company that will have the lowest balance in a contra account is company-2 , which sold bonds at 94%
Bonds are being usually sold at par, at a discount, or at a premium. There exists no notion of a contra asset if the bonds are sold at par. If the bonds are sold at a discount, the net cash received will be lesser than the amount of par value of the bonds issued. Under this scenario, the bonds payable account can only display the par value of the bonds issued, however, the difference among both the par value of the bonds as well as the net cash actually realized from this kind of bond issue will be parked in a contra account which will be amortized over the bond's tenure.
As such, the lowest balance in the contra account for the four companies can be computed as:
company4 company3 company2 company1
Bond par value $6,000,000 $6,000,000 $6,000,000 $6,000,000
Issued at 105% 101% 94% 99%
Net cash - 6300000 6060000 5640000 5940000
realized
Contra
account 3000000 60000 (-360000) -60000
balance
Therefore, it is obvious that the company with the lowest balance in a contra account is company 2, which sold their bonds at 94%
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