Question
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $11,700,000 of five-year, 12%
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method
On the first day of its fiscal year, Chin Company issued $11,700,000 of five-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 $11,279,500.
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. Round your answers to the nearest dollar.
1. | fill in the blank | fill in the blank | |
fill in the blank | fill in the blank | ||
fill in the blank | fill in the blank | ||
2. | fill in the blank | fill in the blank | |
fill in the blank | fill in the blank | ||
fill in the blank 112aa200f031fd1_17 | fill in the blank 112aa200f031fd1_18 | ||
3. | fill in the blank 112aa200f031fd1_20 | fill in the blank 112aa200f031fd1_21 | |
fill in the blank 112aa200f031fd1_23 | fill in the blank 112aa200f031fd1_24 | ||
fill in the blank 112aa200f031fd1_26 | fill in the blank 112aa200f031fd1_27 |
b. Determine the amount of the bond interest expense for the first year. $fill in the blank 788eee0a4f84fba_1
c. Why was the company able to issue the bonds for only $11,279,500 rather than for the face amount of $11,700,000? The market rate of interest is the contract rate of interest. Therefore, inventors willing to pay the full face amount of the bonds.
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