Question

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       ______ ______

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