Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Jacinto Company issued $25,600,000 of five-year, 10% 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 12%, resulting in Jacinto Company receiving cash of $23,715,699.

a. Journalize the entries to record the following:

Issuance of the bonds. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. 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 Cash 23,715,699 Cash Discount on Bonds Payable Discount on Bonds Payable Discount on Bonds Payable Bonds Payable Bonds Payable Bonds Payable 25,600,000

2. Interest Expense Interest Expense Interest Expense Discount on Bonds Payable Discount on Bonds Payable Discount on Bonds Payable Cash Cash Cash

3. Interest Expense Interest Expense Interest Expense Discount on Bonds Payable Discount on Bonds Payable Discount on Bonds Payable Cash Cash Cash

b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar. $fill in the blank 67ed9e075ff2010_1

c. Why was the company able to issue the bonds for only $23,715,699 rather than for the face amount of $25,600,000? The market rate of interest is the contract rate of interest.