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anslate myWSU Into Admi. New Tab eBook Calculator Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $13,000,000
anslate myWSU Into Admi. New Tab eBook Calculator Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $13,000,000 of 5-year, 9% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) Interest rate of 11%, resulting in Ebert Company receiving cash of $12,020,104. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round amounts to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank. Cash Discount on Bonds Payable bonds Payable 12.030,104 9.896 2. First semiannual interest payment, including amortization of discount Round to the nearest dollar. For a compound transaction, an amount box does not require an entry, leave it blank Interest Expens Discount on Bonds Payable 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank. Interest Expens Discount on Bonds Payable Cash b. Compute the amount of the bond Interest expense for the first year. Round amounts to the nearest dollar S e rest payment, including amortization of discount. Round to the nearest dollar. For a compound transaction of an amount box does not an entry, leave it blank. Therest Expense Discount on Bonds Payable Cash b. Compute the amount of the bond interest expense for the first year. Round amounts to the nearest Annual interest paid Discount amortized Interest expense for first year c. Explain why the company was able to issue the bonds for only $12,020,104 rather than for the face amount of $13,000,000 The bonds sell for less than their face amount because the market rate of interest is the contract rate of interest. Investors willing to pay the full face amount for bonds that pay a lower contract rate of interest than the rate they could earn on similar bonds (market rate). (Previous Next All work saved. Test for Grading
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