Question
Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $4,100,000 of 7-year, 9% bonds at a market (effective) interest rate
Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $4,100,000 of 7-year, 9% bonds at a market (effective) interest rate of 7%, receiving cash of $4,547,740. Interest is payable semiannually on April 1 and October 1.
a. Journalize the entry to record the issuance of bonds on April 1, 20Y1. If an amount box does not require an entry, leave it blank.
fill in the blank 61576d029faf01d_2 fill in the blank 61576d029faf01d_3 fill in the blank 61576d029faf01d_5 fill in the blank 61576d029faf01d_6 fill in the blank 61576d029faf01d_8 fill in the blank 61576d029faf01d_9 b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for six months, using the straight-line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
fill in the blank ff5b28f46005062_2 fill in the blank ff5b28f46005062_3 fill in the blank ff5b28f46005062_5 fill in the blank ff5b28f46005062_6 fill in the blank ff5b28f46005062_8 fill in the blank ff5b28f46005062_9 c. Why was the company able to issue the bonds for $4,547,740 rather than for the face amount of $4,100,000?
The market rate of interest is the contract rate of interest.
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