Question
Texxon Corporation issued $400,000 of 20-year bonds with a payment (coupon) rate of 12%; payments are made semiannually. Assume that the market interest rate
Texxon Corporation issued $400,000 of 20-year bonds with a payment (coupon) rate of 12%; payments are made semiannually. Assume that the market interest rate for these bonds is 10%, compounded semiannually. 1. The journal entry that would be made to record the issue of these bonds would include: a. a credit to cash for $400,000 b. a debit to Bonds Payable for $400,000 c. a credit to Premium on Bonds Payable for $56,800 d. a credit to Premium on Bonds Payable for $68,616 2. The journal entry that would be made when the first payment is made to the bondholders would include: a. a debit to Cash for $24,000.00 b. a debit to Interest Expense for $23,430.80 c. a credit to Discount on Bonds Payable for $569.20 d. a debit to Bonds Payable for $24,000.00 3. The journal entry that would be made when the final payment of $400,000 is made to the bondholders would include: a. a debit to Premium on Bonds Payable for $68,616 b. a debit to Cash for $400,000 c. a debit to Bonds Payable for $400,000 d. a credit to Premium on Bonds Payable for $24,000
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