Question

# Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its...

Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method

On the first day of its fiscal year, Chin Company issued \$17,400,000 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 14%, resulting in Chin Company receiving cash of \$16,177,908.

accounts payable/bonds payable/cash/interest expense/interest payable/premium on bonds payable/discount on bonds payable/

a. Journalize the entries to record the following:

1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
3. Second semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)

For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.

 1. fill in the blank 1cafb5094fde042_2 fill in the blank 1cafb5094fde042_3 fill in the blank 1cafb5094fde042_5 fill in the blank 1cafb5094fde042_6 fill in the blank 1cafb5094fde042_8 fill in the blank 1cafb5094fde042_9 2. fill in the blank 1cafb5094fde042_11 fill in the blank 1cafb5094fde042_12 fill in the blank 1cafb5094fde042_14 fill in the blank 1cafb5094fde042_15 fill in the blank 1cafb5094fde042_17 fill in the blank 1cafb5094fde042_18 3. fill in the blank 1cafb5094fde042_20 fill in the blank 1cafb5094fde042_21 fill in the blank 1cafb5094fde042_23 fill in the blank 1cafb5094fde042_24 fill in the blank 1cafb5094fde042_26 fill in the blank 1cafb5094fde042_27

b. Determine the amount of the bond interest expense for the first year.
\$fill in the blank c806ab06305807e_1

c. Why was the company able to issue the bonds for only \$16,177,908 rather than for the face amount of \$17,400,000?
The market rate of interest is (greater than or less than) the contract rate of interest.

#### Homework Answers

Answer #1
 a 1 Cash 16177908 Discount on Bonds Payable 1222092 Bonds Payable 17400000 2 Interest Expense 1166209 Discount on Bonds Payable 122209 =1222092/5*6/12 Cash 1044000 =17400000*12%*6/12 3 Interest Expense 1166209 Discount on Bonds Payable 122209 Cash 1044000 b Bond interest expense for the first year 2332418 =1166209+1166209 c The market rate of interest is greater than the contract rate of interest.
Know the answer?
Your Answer:

#### Post as a guest

Your Name:

What's your source?

#### Earn Coins

Coins can be redeemed for fabulous gifts.

##### Not the answer you're looking for?
Ask your own homework help question