uctions reau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Favreau Corporation issued $21, -year, 4% bonds at a market (effective) interest rate of 3%, receiving cash of $22,282,220. Interest is payable semiannually on tober 1.
uctions reau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Favreau Corporation issued $21, -year, 4% bonds at a market (effective) interest rate of 3%, receiving cash of $22,282,220. Interest is payable semiannually on tober 1.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Instructions Chart of Accounts Journal
Instructions
Favreau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Favreau Corporation issued $21,300,000 of
five-year, 4% bonds at a market (effective) interest rate of 3%, receiving cash of $22,282,220. Interest is payable semiannually on April 1 and
October 1.
3
Required:
a. Journalize the entries to record the following. Refer to the chart of accounts for the exact wording of the account titles. CNOW
journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will
automatically indent a credit entry when a credit amount is entered.
1. Issuance of bonds on April 1.
2. First interest payment on October 1 and amortization of bond premium for six months, using the straight-line method. The bond
premium amortization is combined with the semiannual interest payment. (Round to the nearest dollar.)
b. Explain why the company was able to issue the bonds for $22,282,220 rather than for the face amount of $21,300,000.
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