Entries for Issuing Bonds and Amortizing Discount by Straight Line Method On the first day of its fiscal year, Jacinto Company issued $21,400,000 of five year, 9 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 11 , resulting in Jacinto Company receiving cash of $19,786,940 Question Content Area 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 Accounts PayableBonds PayableCashInterest ExpenseInterest PayableCash Cash Cash Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableDiscount on Bonds Payable Discount on Bonds Payable Discount on Bonds Payable Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableBonds Payable Bonds Payable Bonds Payable 2 Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableInterest Expense Interest Expense Interest Expense Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableDiscount on Bonds Payable Discount on Bonds Payable Discount on Bonds Payable Accounts PayableBonds PayableCashInterest ExpenseInterest PayableCash Cash Cash 3 Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableInterest Expense Interest Expense Interest Expense Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableDiscount on Bonds Payable Discount on Bonds Payable Discount on Bonds Payable Accounts PayableBonds PayableCashInterest ExpenseInterest PayableCash Cash Cash Feedback Area Feedback 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 Question Content Area b Determine the amount of the bond interest expense for the first year Round your answer to the nearest dollar $fill in the blank 7713fc03c012f9f 1 c Why was the company able to issue the bonds for only $19,786,940 rather than for the face amount of $21,400,000 The market rate of interest is greater than less thangreater than the contract rate of interest

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 31, 2024

Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Jacinto Company issued $21,400,000 of five-year, 9%

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

On the first day of its fiscal year, Jacinto Company issued $21,400,000 of five-year, 9% 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 11%, resulting in Jacinto Company receiving cash of $19,786,940.

Question Content Area

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.	Accounts PayableBonds PayableCashInterest ExpenseInterest PayableCash	Cash	Cash
	Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableDiscount on Bonds Payable	Discount on Bonds Payable	Discount on Bonds Payable
	Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableBonds Payable	Bonds Payable	Bonds Payable
2.	Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableInterest Expense	Interest Expense	Interest Expense
	Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableDiscount on Bonds Payable	Discount on Bonds Payable	Discount on Bonds Payable
	Accounts PayableBonds PayableCashInterest ExpenseInterest PayableCash	Cash	Cash
3.	Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableInterest Expense	Interest Expense	Interest Expense
	Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayableDiscount on Bonds Payable	Discount on Bonds Payable	Discount on Bonds Payable
	Accounts PayableBonds PayableCashInterest ExpenseInterest PayableCash	Cash	Cash

Feedback Area

Feedback

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.

Question Content Area

b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar. $fill in the blank 7713fc03c012f9f_1

c. Why was the company able to issue the bonds for only $19,786,940 rather than for the face amount of $21,400,000? The market rate of interest is

greater than less thangreater than

the contract rate of interest.