Instructions Favreau Corporation wholesales repair products to equipment manufacturers On April 1, Year 1. Favreau Corporation issued $35,000,000 of five-year, 7% bonds at a market (effective interest rate of 6%, receiving cash of $36,492,785. Interest is payable semiannually on April 1 and October 12 Required: a. Journaize the entries to record the following. Refer to the chart of accounts for the exact wording or the accounts, CNOW journals do not uso ines for journal explanations. Every Nne on a journal page is used for debut or crede entries CNOW/oumnats will automatically inderita credit entry when a credit amount is entered 1. Issuance of bonds on Apni 1. 2. First interest payment on October and amortization of bond premium for six months. Using the straight line method The bond premium amortization is combined with the semiannual interest payment (Round to the nearest dollar) 5. Explain why the company was able to issue the bonds for $36 492 785 rather than for the face amount of 535,000,000 CHART OF ACCOUNTS Favreau Corporation General Ledger ASSETS REVENUE 110 Cash 410 Sales 111 Petty Cash 610 Interest Revenue 121 Accounts Receivable 611 Gain on Redemption of Bonds 122 Allowance for Doubtful Accounts 126 Interest Receivable EXPENSES 127 Notes Receivable 510 Cost of Merchandise Sold 131 Merchandise Inventory 515 Credit Card Expense 141 Office Supplies 142 Store Supplies 516 Cash Short and Over 521 Sales Salaries Expense 522 Office Salaries Expense 531 Advertising Expense 151 Prepaid Insurance 191 Land 532 Delivery Expense 533 Repairs Expense 192 Store Equipment 193 Accumulated Depreciation Store Equipment 194 Office Equipment 195 Accumulated Depreciation Office Equioment 534 Selling Expenses 535 Rent Expense 536 Insurance Expense LIABILITIES 210 Accounts Payable 221 Salaries Payable 537 Office Supplies Expense 538 Store Supplies Expense 541 Bad Debt Expense 561 Depreciation Expense-Store Equipment 562 Depreciation Expense-Office Equipment 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 590 Miscellaneous Expense 251 Bonds Payable 710 Interest Expense 252 Discount on Bonds Payable 711 Loss on Redemption of Bonds 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 351 Cash Dividends 352 Stock Dividends Journal a. Journalize the entries Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations Every Ane on Journal page is used for debit or credit entries. CNOW Journals will automatically indent a creat entry when a crecht amount is entered DATE DESCRIPTION POST REF DERIT CREDET LATILIS EDUTY 1 2 1 4 $ 6 Final Question Explain why the company was able to save the bonds for $36.492 785 rather than for the face amount of $35 000 000 Willing The bonds sell for more than their face amount because the market rate of interest is the contract rate of interest Investors to pay more for bonds that pay a higher rate of interest (contract rate) than the rate they could eam on similar bonds market rate)