Required a Journalize the entries to record the following (refer to the chart of accounts for the exact wording of the account titles CNOW journals do not use lines for journal explanations Every line on a journal page is used for debit or credit entries CNOW journals will automatically indent a credit entry when a credit amount is entered ) 1 Issuance of the bonds 2 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 ) 3 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 ) 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 $11,787,069 rather than for the face amount of $12,700,000 CHART OF ACCOUNTS Jacinto Company General Ledger ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Merchandise Inventory 141 Office Supplies 142 Store Supplies 151 Prepaid Insurance 191 Land 192 Store Equipment 193 Accumulated Depreciation Store Equipment 194 Office Equipment 195 Accumulated Depreciation Office Equipment LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable EQUITY 311 Common Stock 312 Paid In Capital in Excess of Par Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid In Capital in Excess of Par Preferred Stock 331 Paid In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 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 $11,787,069 rather than for the face amount of $12,700,000 The bonds sell for less than their face amount because the market rate of interest is the contract rate of interest Investors willing to pay the full face 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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Required: a. Journalize the entries to record the following (refer to the chart of accounts for the exact wording of the account titles. CNOW journals

Required:

Journalize the entries to record the following (refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.):

1.	Issuance of the bonds.
2.	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.)
3.	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.)

Determine the amount of the bond interest expense for the first year.

Explain why the company was able to issue the bonds for only $11,787,069 rather than for the face amount of $12,700,000.

CHART OF ACCOUNTS

Jacinto Company

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable
122	Allowance for Doubtful Accounts
126	Interest Receivable
127	Notes Receivable
131	Merchandise Inventory
141	Office Supplies
142	Store Supplies
151	Prepaid Insurance
191	Land
192	Store Equipment
193	Accumulated Depreciation-Store Equipment
194	Office Equipment
195	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
221	Salaries Payable
231	Sales Tax Payable
232	Interest Payable
241	Notes Payable
251	Bonds Payable
252	Discount on Bonds Payable
253	Premium on Bonds Payable

	EQUITY
311	Common Stock
312	Paid-In Capital in Excess of Par-Common Stock
315	Treasury Stock
321	Preferred Stock
322	Paid-In Capital in Excess of Par-Preferred Stock
331	Paid-In Capital from Sale of Treasury Stock
340	Retained Earnings
351	Cash Dividends
352	Stock Dividends

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 $11,787,069 rather than for the face amount of $12,700,000.

The bonds sell for less than their face amount because the market rate of interest is the contract rate of interest. Investors willing to pay the full face amount for bonds that pay a lower contract rate of interest than the rate they could earn on similar bonds (market rate).