Question
On the first day of its fiscal year, Chin Company issued $21,000,000 of five-year, 8% bonds to finance its operations of producing and selling home
On the first day of its fiscal year, Chin Company issued $21,000,000 of five-year, 8% 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 10%, resulting in Chin Company receiving cash of $19,378,363.
Part A: 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.
Part B: Determine the amount of the bond interest expense for the first year.
Part C: Why was the company able to issue the bonds for only $19,378,363 rather than for the face amount of $21,000,000? The market rate of interest is____________ the contract rate of interest. (Greater Than/Less Than)
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