14.2

Entries for issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Jacinto company issued $10,100,000 of five-year, 9% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bands were issued at a market (effective) Interest rate of 10%, resulting in Jacinto Company receiving cash of $9,710,017 a. Journalize the entries to record the following: 1. Issuance of the bonds, 2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. 3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. 1. Cash 9,710,017 309,983 Discount on Bonds Payable Bonds Payable 10,100,000 2 486,199 X Interest Expense Discount on Bonds Payable 32.499X Cash 454.500 486.999X 3. Interest Expense Discount on Bonds Payable 52,40 X Cash 454500 b. Determine the amount of the bond Interest expense for the first year. Round your answer to the nearest dollar. c. Why was the company able to issue the bonds for only $9,710,017 rather than for the face amount of $10,100,000? The market rate of interest is greater than the contract rate of interest