a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 3. Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) If an amount box does not require an entry, leave it blank.. 1 2. 3. b. Determine the amount of the bond interest expense for the first year. c. Why was the company able to issue the bonds for only $25,547,585 rather than for the face amount of $26,500,000? the contract rate of interest. Therefore, inventors The market rate of interest is willing to pay the full face amount of the bonds.
a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 3. Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) If an amount box does not require an entry, leave it blank.. 1 2. 3. b. Determine the amount of the bond interest expense for the first year. c. Why was the company able to issue the bonds for only $25,547,585 rather than for the face amount of $26,500,000? the contract rate of interest. Therefore, inventors The market rate of interest is willing to pay the full face amount of the bonds.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method
On the first day of its fiscal year, Chin Company issued $26,500,000 of five-year, 12% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds
were issued at a market (effective) interest rate of 13%, resulting in Chin receiving cash of $25,547,585.
a. Journalize the entries to record the following:
1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
3. Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
If an amount box does not require an entry, leave it blank.
1.
2.
3.
300
000 000 000
000
b. Determine the amount of the bond interest expense for the first year.
Transcribed Image Text:a. Journalize the entries to record the following:
1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
3. Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
If an amount box does not require an entry, leave it blank.
1.
2.
3.
000 000
000 000 000
b. Determine the amount of the bond interest expense for the first year.
c. Why was the company able to issue the bonds for only $25,547,585 rather than for the face amount of $26,500,000?
the contract rate of interest. Therefore, inventors
The market rate of interest is
willing to pay the full face amount of the bonds.
Expert Solution
Step 1
Bond :— It is one of the source of capital which gives fixed periodic interest and face value at the time of maturity to their investors.
When bond is issued on discount. It means face value of bond is greater than issue price of bond.
Discount is amortized periodically.
When bond is issued on premium. It means face value of bond is less than issue price of bond.
Premium is amortized periodically.
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