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

On the first day of its fiscal year, Chin Company issued $$16,500,000$ of $5-$year, $12\%$ 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 $13\%,$ resulting in Chin receiving cash of $$15,906,987.$

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.

Cash

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

$

c$.$ Why was the company able to issue the bonds for only $$15,906,987$ rather than for the face amount of $$16,500,000?$

The market rate of interest is greater than

the contract rate of interest. Therefore, inventors are not

willing to pay the full face amount of the bonds.