Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method

On the first day of its fiscal year, Chin Company issued $12,000,000 of five-year, 8% 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 10%, resulting in Chin receiving cash of $11,073,350.

a. Journalize the entries to record the following:

1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
3. 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.

1.		fill in the blank 487ac703703ffd9_2	fill in the blank 487ac703703ffd9_3
		fill in the blank 487ac703703ffd9_5	fill in the blank 487ac703703ffd9_6
		fill in the blank 487ac703703ffd9_8	fill in the blank 487ac703703ffd9_9
2.		fill in the blank 487ac703703ffd9_11	fill in the blank 487ac703703ffd9_12
		fill in the blank 487ac703703ffd9_14	fill in the blank 487ac703703ffd9_15
		fill in the blank 487ac703703ffd9_17	fill in the blank 487ac703703ffd9_18
3.		fill in the blank 487ac703703ffd9_20	fill in the blank 487ac703703ffd9_21
		fill in the blank 487ac703703ffd9_23	fill in the blank 487ac703703ffd9_24
		fill in the blank 487ac703703ffd9_26	fill in the blank 487ac703703ffd9_27

b. Determine the amount of the bond interest expense for the first year. $fill in the blank a3763bff0fc706b_1

c. Why was the company able to issue the bonds for only $11,073,350 rather than for the face amount of $12,000,000? The market rate of interest is the contract rate of interest. Therefore, inventors willing to pay the full face amount of the bonds.