Homework Help is Here – Start Your Trial Now!
Business
Accounting
On the first day of its fiscal year, Chin Company issued $20,400,000 of 5-year, 10% 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 12%, resulting in Chin receiving cash of $18,898,448. 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. Cash 18,898,448 Discount on Bonds Payable ✓ 1,501,552 V 20,400,000 Bonds Payable 2. Interest Expense ✓ Discount on Bonds Payable Cash 3. Interest Expense ✓ Discount on Bonds Payable Cash Feedback ▼Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond. 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 $18,898,448 rather than for the face amount of $20,400,000? The market rate of interest is the contract rate of interest. Therefore, inventors willing to pay the full face amount of the bonds.

On the first day of its fiscal year, Chin Company issued $20,400,000 of 5-year, 10% 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 12%, resulting in Chin receiving cash of $18,898,448. 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. Cash 18,898,448 Discount on Bonds Payable ✓ 1,501,552 V 20,400,000 Bonds Payable 2. Interest Expense ✓ Discount on Bonds Payable Cash 3. Interest Expense ✓ Discount on Bonds Payable Cash Feedback ▼Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond. 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 $18,898,448 rather than for the face amount of $20,400,000? The market rate of interest is the contract rate of interest. Therefore, inventors willing to pay the full face amount of the bonds.

Financial Accounting
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter14: Long-term Liabilities: Bonds And Notes
Section: Chapter Questions
Problem 6PA: Saverin, Inc. produces and sells outdoor equipment. On July 1, 2016, Saverin, Inc. issued 62,500,000...
See similar textbooks
icon
Related questions
Question

vnit.8

Entries for issuing bonds and amortizing discount by straight-line method On the first day of its fiscal year, Chin Company issued $20,400,000 of 5-year, 10% 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 12%, resulting in Chin receiving cash of $18,898,448. 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. Cash 18,898,448 Discount on Bonds Payable 1,501,552 Bonds Payable 20,400,000 2. Interest Expense Discount on Bonds Payable Cash 3. Interest Expense Discount on Bonds Payable Cash Feedback Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond. 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 $18,898,448 rather than for the face amount of $20,400,000? The market rate of interest is the contract rate of interest. Therefore, inventors willing to pay the full face amount of the bonds.
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 $20,400,000 of 5-year, 10% 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 12%, resulting in Chin receiving cash of $18,898,448. 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. Cash 18,898,448 Discount on Bonds Payable 1,501,552 Bonds Payable 20,400,000 2. Interest Expense Discount on Bonds Payable Cash 3. Interest Expense Discount on Bonds Payable Cash Feedback Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond. 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 $18,898,448 rather than for the face amount of $20,400,000? The market rate of interest is the contract rate of interest. Therefore, inventors willing to pay the full face amount of the bonds.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Accounting for Notes
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Financial Accounting
Financial Accounting
Accounting
ISBN:
9781305088436
Author:
Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Excel Applications for Accounting Principles
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
College Accounting, Chapters 1-27
College Accounting, Chapters 1-27
Accounting
ISBN:
9781337794756
Author:
HEINTZ, James A.
Publisher:
Cengage Learning,
SEE MORE TEXTBOOKS