Entries for issuing bonds and amortizing discount by straight$-$line method

On the first day of its fiscal year, Chin Company issued $$29,900,000$ of $5-$year, $5\%$ bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market $($effective$)$ interest rate of $7\%,$ resulting in Chin receiving cash of $$27,413,374.$

Question Content Area

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.

EntriesAccountDebitCredit

$1.$

$2.$

$3.$

Question Content Area

b$.$ Determine the amount of the bond interest expense for the first year.

fill in the blank $1$ of $1$$

c$.$ Why was the company able to issue the bonds for only $$27,413,374$ rather than for the face amount of $$29,900,000?$

The market rate of interest is fill in the blank $1$ of $2$

the contract rate of interest. Therefore, inventors fill in the blank $2$ of $2$

willing to pay the full face amount of the bonds.