Record the journal entries in the books of Corporation J.

Question

On January 1, 2019, $40 million face amount of 5%, 20-year bonds were issued. The bonds pay interest on a semiannual basis on June 30 and December 31 each year. The market interest rates were slightly higher than 5% when the bonds were sold. Were these bonds issued at a premium or discount? Will the semiannual interest expense on these bonds be more than or less than the amount of interest paid on each payment date? Multiple Choice The bonds were issued at a discount, and the semiannual interest expense will be more than the amount of interest paid on each payment date. The bonds were issued at a discount, and the semiannual interest expense will be less than the amount of interest paid on each payment date. The bonds were issued at a premium, and the semiannual interest expense will be more than the amount of interest paid on each payment date. The bonds were issued at a premium, and the semiannual interest expense will be less than the amount of interest paid on each payment date.

Answer 1

Question

Chapter 13, Problem 3P

1.

To determine

Record the journal entries in the books of Corporation J.

2.

To determine

Explain the errors that would occur in the company’s financial statements if Corporation J has failed to record the interest at acquisition.

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On January 1, 2019, $40 million face amount of 5%, 20-year bonds were issued. The bonds pay interest on a semiannual basis on June 30 and December 31 each year. The market interest rates were slightly higher than 5% when the bonds were sold. Were these bonds issued at a premium or discount? Will the semiannual interest expense on these bonds be more than or less than the amount of interest paid on each payment date? Multiple Choice The bonds were issued at a discount, and the semiannual interest expense will be more than the amount of interest paid on each payment date. The bonds were issued at a discount, and the semiannual interest expense will be less than the amount of interest paid on each payment date. The bonds were issued at a premium, and the semiannual interest expense will be more than the amount of interest paid on each payment date. The bonds were issued at a premium, and the semiannual interest expense will be less than the amount of interest paid on each payment date.

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