Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% bonds interest rate of 8%, resulting in Chin receiving cash of $9,594,415. finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) 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.) For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. 1. Cash Discount on Bonds Payable 405,585 Bonds Payable 10.000.000 390.359 2. Interest Expense Discount on Bonds Payable Cash 40.550 350.000 390,5597 3. Interest Expense Discount on Bonds Payable Cash 40.559 350,000 Feedback Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond, Learning Objective 2. b. Determine the amount of the bond interest expense for the first year. 390,559 c. Why was the company able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000? The market rate of interest is greater than the contract rate of interest. Feedback Check My Work