Question
On the first day of its fiscal year, Chin Company issued $23,600,000 of five-year, 5% bonds to finance its operations of producing and selling home
On the first day of its fiscal year, Chin Company issued $23,600,000 of five-year, 5% 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 7%, resulting in Chin Company receiving cash of $21,637,312.
Journalize the entries to record the following:
Issuance of the bonds.
First semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
Second semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.
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b. Determine the amount of the bond interest expense for the first year. $
c. Why was the company able to issue the bonds for only $21,637,312 rather than for the face amount of $23,600,000? The market rate of interest is the contract rate of interest.
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