1. Shunda Corporation wholesales parts to appliance manufacturers. On January 1, Shunda issued $22,000,000 of five-year, 9% bonds at a market (effective) interest rate of 7%, receiving cash of $23,829,684. Interest is payable semiannually. Shundas fiscal year begins on January 1. The company uses the interest method.

   a. Journalize the entries to record the following:

   1. Sale of the bonds. Round amounts to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.

   		fill in the blank a4cd6d01a00ffdf_2	fill in the blank a4cd6d01a00ffdf_3
   		fill in the blank a4cd6d01a00ffdf_5	fill in the blank a4cd6d01a00ffdf_6
   		fill in the blank a4cd6d01a00ffdf_8	fill in the blank a4cd6d01a00ffdf_9

   2. First semiannual interest payment, including amortization of premium. Round to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.

   		fill in the blank e35faff8fff601f_2	fill in the blank e35faff8fff601f_3
   		fill in the blank e35faff8fff601f_5	fill in the blank e35faff8fff601f_6
   		fill in the blank e35faff8fff601f_8	fill in the blank e35faff8fff601f_9

   3. Second semiannual interest payment, including amortization of premium. Round to the nearest dollar. For a compound transaction, if an amount box does not require an entry, leave it blank.

   		fill in the blank 3d87fcfb1029042_2	fill in the blank 3d87fcfb1029042_3
   		fill in the blank 3d87fcfb1029042_5	fill in the blank 3d87fcfb1029042_6
   		fill in the blank 3d87fcfb1029042_8	fill in the blank 3d87fcfb1029042_9

   b. Determine the bond interest expense for the first year. Enter amounts as positive numbers. Round amounts to the nearest dollar.

   Annual interest paid	$fill in the blank 22180e07cfc6018_1
   Less premium amortized	fill in the blank 22180e07cfc6018_2
   Interest expense for first year	$fill in the blank 22180e07cfc6018_3

   c. Explain why the company was able to issue the bonds for $23,829,684 rather than for the face amount of $22,000,000.

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