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mortize discount by interest method n the first day of its fiscal year, Ebert Company issued $50,000,000 of 10 -year, 7% bonds to finance its
mortize discount by interest method n the first day of its fiscal year, Ebert Company issued $50,000,000 of 10 -year, 7% bonds to finance its operations, Interest is payable semiannally The bonds were. sued at a market (effective) interest rate of 9%, resuling in Ebert receiving cash of $43,495,895. The company uses the interest method. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 3. Second semiannual interest payment, Including amortiration of discount. Round to the nearest dollar, If an amount box does not require an entry, leave it blank: b. Compute the amount of the bond interest experise for the first year. Round to the nearest dollar. c. Explain why the company was atis to wuse the bends for onily $43,495,095 rather than for the face amount of $50,000,000. The bonds sell for less than their foce amount becouje the macket rate of intectst is the contract rate of interest Investon Woting to pay the full foce amount for bonds that pay a lower contract rate of interest than the rate they could earn on similar bonds. (market rate)
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