On the first day of its fiscal year, Jacinto Company issued $27,800,000 of five-year, 9% 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 Jacinto Company receiving cash of $26,726,582.

Question Content Area

a. Journalize the entries to record the following:

1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment.
3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment.

If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.

1.		- Select -	- Select -
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2.		- Select -	- Select -
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3.		- Select -	- Select -
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Question Content Area

b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar. $fill in the blank 47f6f9009077fda_1

c. Why was the company able to issue the bonds for only $26,726,582 rather than for the face amount of $27,800,000? The market rate of interest is

greater than less than

the contract rate of interest.