Entries for issuing bonds and amortizing premium by straight-line method Obj. 2 Smiley Corporation wholesales repair products
Question:
Entries for issuing bonds and amortizing premium by straight-line method Obj. 2 Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $20,000,000 of five-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $20,811,010. Interest is payable semiannually on April 1 and October 1. Journalize the entries to record the following:
a. Issuance of bonds on April 1, 20Y1.
b. First interest payment on October 1, 20Y1, and amortization of bond premium for six months, using the straight-line method.
c. Explain why the company was able to issue the bonds for $20,811,010 rather than for the face amount of $20,000,000.
AppendixLO1
Step by Step Answer:
Corporate Financial Accounting
ISBN: 9781337398176
15th Edition
Authors: Carl Warren, Jefferson Jones