Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Entries for issuing Bonds and Amortizing Discount by straight-Ure H UU On the first day of its fiscal year, Chin Company issued $10,000,000 of five
Entries for issuing Bonds and Amortizing Discount by straight-Ure H UU On the first day of its fiscal year, Chin Company issued $10,000,000 of five year, 7% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective interest rate of 8%, resulting in Chin Company receiving cash of $9,594,415. a. Journalize the entries to record the following: 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) For a compound transaction, If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar Cash 004415 Discount on Bonds Payable 40558 10,000,000 Bonds Payable Interest Expense Discount on Blonds Payable Cash Interest Expense 390.559 Dount on lands Pavable Feedback Check My Work Bonds Payable is always recorded at face value Any difference in issue price is reflected in a premium or discount account. The straight line method of amortization provides equal amounts of amortization over the life of the bond b. Determine the amount of the bond interest expense for the first year. 781,117 x c. Why was the company able to issue the bonds for only $9,594,415 rather than for the face amount of $10,000,000? The market rate of interest is greater than the contract rate of interest Bonds Payable is always recorded at face value Any terence in issue price is reflected in a premium or discount account. The straight line method of amortization provides equal amounts of amortization over the life of the bond Partially correct
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started