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Table 4 Browning Enterprises is considering alternative ways of raising capital for the purchase of a new plant. One alternative suggested by the controller is

Table 4
Browning Enterprises is considering alternative ways of raising
capital for the purchase of a new plant. One alternative
suggested by the controller is the issuance of bonds. After
discussions with an underwriter, Browning decides to issue
$3,000,000 of 6.4%,10-year bonds dated May 1,20x6, with
interest payment dates of November 1 and May 1. Browning's
year-end is December 31. Browning uses the effective-interest
method of amortization.
Refer to Table 4. Assume the bonds were issued on May 1,20X6,
at 89 when the market interest rate was 8%, and the company
uses the effective-interest method of amortization. The December
31,20X6, adjusting entry to accrue interest and record applicable
amortization would include a
credit to premium on bonds payable for $11,232
debit to interest expense for $32,000
debit to bonds payable for $28,256
credit to discount on bonds payable for $3,744
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