EX 11-3 Entries for Issuing Bonds and Amortizing Discount by Straight- Line Method Obj. 2 On the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% 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 8%, resulting in Chin receiving cash of $9,594,415. a. Journalize the entries to record the following: 1. Issuance of the bonds. Then 1 and 2nd interest payment with Discount amortization BONDS ISSUED AT DISCOUNT Entry at Issue Date Issue Date Jan 1, 2015 Jan 1 Face $10,000,000 Term 5 years Contract Rate 7%(% on Jun 1 & Dec Market Rate 8%(% semi-annual) Prodeeds = $9,594,415 Entry at 1st Interest Payment Jun 30 Discount = Face - Proceeds Interest Payment Entry at 2nd Interest Payment Dec 31 Amortization of Discount = Discount number of payments $10,000,000 Carrying Value of Bonds at YE: Bonds Payable Less Discount on BP Book Value of Bonds