Entries for issuing bonds and amortizing discount by straight-line method Instructions Chart of Accounts Journal Final Questions Instructions On the first day of its fiscal year, Chin Company issued $18,400,000 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 9%, resulting in Chin receiving cash of $17.672,074. The fiscal year of the company is the calendar year. Required: a. Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of accountles): 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 combled with the semiannual interest payment (Round your answer to the nearest dollar) b. Determine the amount of the bond interest expense for the first year c. Explain why the company was able to issue the bonds for only $17,672,074 rather than for the face amount of $18.400.000 tructions Chart of Accounts Journal Final Questions uctions rt of Accounts ASSETS REVENUE 410 Sales 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 610 Interest Revenue 611 Gain on Redemption of Bonds 131 Merchandise Inventory EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 521 Sales Salaries Expense 522 Office Salaries Expense 141 Office Supplies 142 Store Supplies 151 Prepaid Insurance 101 Land 531 Advertising Expense ck My Work Instructions Chart of Accounts Journal Final Questions Instructions Chart of Accounts 192 Store Equipment 193 Accumulated Depreciation-Store Equipment 532 Delivery Expense 533 Repairs Expense 534 Selling Expenses 194 Office Equipment 195 Accumulated Depreciation Office Equipment 535 Rent Expense 536 Insurance Expense LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 537 Office Supplies Expense 538 Store Supplies Expense 541 Bad Debt Expense 561 Depreciation Expense-Store Equipment 562 Depreciation Expense-Office Equipment 590 Miscellaneous Expense Check My Work es for issuing bonds and amortizing discount by straight-line method Journal Final Questions nstructions Chart of Accounts structions Chart of Accounts 710 Interest Expense 711 Loss on Redemption of Bonds 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-in Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings Entries for issuing bonds and amortizing discount by straight-line method Instructions Chart of Accounts Journal Final Questions Instructions Journal JOURNAL ACCOUNTING EQUATIC DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES Entries for issuing bonds and amortizing discount by straight-line method Instructions Chart of Accounts Journal Final Questions Instructions Journal Final Questions b. Determine the amount of the bond interest expense for the first year c. Explain why the company was able to issue the bonds for only $17,672,074 rather than for the face amount of $18.400,000 The bonds sell for less than their face amount because the market rate of interest is the contract rate of interest. Investors willing to pay the full face amount for bonds that pay a lower contract rate of interest than the rate they could earn on similar bonds (market rate) Previous Next Check My Work
