Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Daan Corporation wholesales repair products to equipment
Question:
Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method
Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Daan Corporation issued $6,600,000 of 5-year, 9% bonds at a market (effective) interest rate of 6%, receiving cash of $7,444,492. Interest is payable semiannually on April 1 and October 1.
a. Journalize the entry to record the issuance of bonds on April 1, 2016. For a compound transaction, if an amount box does not require an entry, leave it blank.
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b. Journalize the entry to record the first interest payment on October 1, 2016, and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual interest payment. (Round to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank.
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c. Why was the company able issue the bonds for $7,444,492 rather than for the face amount of $6,600,000?
The market rate of interest is the contract rate of interest.
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren