Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Instructions Smiley Corporation wholesales repair products to equipment manufacturers. On April 1. Year 1, Smiley Corporation issued $25,100,000 of five-year, 5% semiannually on April 1

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Instructions Smiley Corporation wholesales repair products to equipment manufacturers. On April 1. Year 1, Smiley Corporation issued $25,100,000 of five-year, 5% semiannually on April 1 and October 1. Required: A. Joumalize the entries to record the following Refer to the Chart of Accounts for exact wording of account titles 1. Issuance of bonds on April 1 2. First interest payment on October 1 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) B. Explain why the company was able to issue the bonds for $27.414 835 rather than for the face amount of $25 100.000 turers. On April 1. Year 1, Smiley Corporation issued $25,100,000 of five-year, 5% bonds at a market (effective) interest rate of 3%, receiving cash of $27.414,835. Interest is payable art of Accounts for exact wording of account titles and premium for six months using the straight line method. The band premium ment (Round to the nearest dollar) 7,414,835 rather than for the face amount of $25.100.000 Journal PAGE 10 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTON POST RET DEBIT CREDIT ASSETS LIABILITIES DOLATY 2 Final Question 8. Explain why the company was able to issue the bonds for $27414,835 rather than for the face amount of 525, 100,000 The bonds sell for more than their face amount because the market rate of interestis they could earn on similar bonds (market rate) the contract rate of interest. Investors willing to pay more for bonds that par the same as less than greater than

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Jill Collis

1st Edition

1137335882, 978-1137335883

More Books

Students also viewed these Accounting questions

Question

=+b) Identify all the factor levels.

Answered: 1 week ago