Question
Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Smiley issued
Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method
Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Smiley issued $1,700,000 of 7-year, 12% bonds at a market (effective) interest rate of 9%, receiving cash of $1,960,682. Interest is payable semiannually on April 1 and October 1.
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a. Journalize the entry to record the issuance of bonds on April 1, Year 1. If an amount box does not require an entry, leave it blank.
blank | Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds PayableCash | Cash | Cash |
Accounts PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds PayablePremium on Bonds Payable | Premium on Bonds Payable | Premium on Bonds Payable | |
Accounts PayableBonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayableBonds Payable | Bonds Payable | Bonds Payable |
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b. Journalize the entry to record the first interest payment on October 1, Year 1, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar.) If an amount box does not require an entry, leave it blank.
blank | Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayableInterest ReceivableInterest Expense | Interest Expense | Interest Expense |
Bonds PayableCashDiscount on Bonds PayableInterest PayableInterest ReceivablePremium on Bonds PayablePremium on Bonds Payable | Premium on Bonds Payable | Premium on Bonds Payable | |
Bonds PayableCashDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds PayableCash | Cash | Cash |
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