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On January 1, the first day of its fiscal year, Pretender Company issued $18,500,000 of five-year, 10% bonds to finance its operations of producing and
On January 1, the first day of its fiscal year, Pretender Company issued $18,500,000 of five-year, 10% 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 12%, resulting in Pretender Company receiving cash of $17,138,298.
Required:
A. | Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of account titles):
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B. | Determine the amount of the bond interest expense for the first year. | ||||||
C. | Explain why the company was able to issue the bonds for only $17,138,298 rather than for the face amount of $18,500,000. |
CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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General Ledger | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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A. Journalize the entries to record the transactions. Refer to the Chart of Accounts for exact wording of account titiles. How does grading work PAGE 10 JOURNAL Score: 80/112 DATE DESCRIPTION POST. REF DEBIT 1,361,702.00 17,138,298.00 CREDIT Jan. 1 Discount on Bonds Payable Cash Bonds Payable Interest Payable Discount on Bonds Payable 18,500,000.00 925,000.00 103,298.00 Jan. 2 Interest Payable 925,000.00 Jan. 3 Cash 925,000.00 Interest Expense 109,496.00 Cash 925,000.00
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