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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 $27,400,000 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 receiving cash of $25,475,556.

a. Journalize the entries to record the following:

Issuance of the bonds.

First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)

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. Round your answers to the nearest dollar.

1. Cash ________   _______
Discount on Bonds Payable
________   _______
Bonds Payable
________   _______
2. Interest Expense
________   _______
Discount on Bonds Payable
________   _______
Cash
________   _______
3. Interest Expense
________   _______
Discount on Bonds Payable
________   _______

Cash       ______ ______

Homework Answers

Answer #1
Debit Credit
1 Cash 25475556
Discount on bonds payable 1924444
             Bonds payable 27400000
2 Interest expense 1783289
             Discount on bonds payable 139289
             Cash 1644000
3 Interest expense 1793039
             Discount on bonds payable 149039
             Cash 1644000
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