Entries for Issuing Bonds and Amortizing Premium by Straight-Line MethodFavreau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Favreau Corporation issued $8,000,000 of 5-year, 10% bonds at amarket (effective) interest rate of 9%, receiving cash of $8,316,508. Interest is payable semiannually on April 1 and October 1.a. Journalize the entry to record the issuance of bonds on April 1. If an amount box does not require an entry, leave it blank.CashPremium on Bonds PayableBonds Payableb. Journalize the entry to record the first interest payment on October 1 and amortization of bond premium for six months, using the straight-line method. The bondpremium amortization is combined with the semiannual interest payment. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.Interest ExpensePremium on Bonds PayableCash8,316,508c. Why was the company able to issue the bonds for $8,316,508 rather than for the face amount of $8,000,000?The market rate of interestgreater thanless thanthe contract rate of interest.

a) Premium on Bonds Payable = Cash Received - Bonds Face Value =8,316,508 - 8,000,000 =316,508…

. Journalize the entry to record the issuance of bonds on April 1. If an amount box does not require an entry, leave it blank. Cash Premium on Bonds Payable Bonds Payable 8,316,508 . Journalize the entry to record the first interest payment on October 1 and amortization of bond premium for six months, using the straigh remium amortization is combined with the semiannual interest payment. Round to the nearest dollar. If an amount box does not require Interest Expense Premium on Bonds Payable Cash . Why was the company able to issue the bonds for $8,316,508 rather than for the face amount of $8,000,000?

. Journalize the entry to record the issuance of bonds on April 1. If an amount box does not require an entry, leave it blank. Cash Premium on Bonds Payable Bonds Payable 8,316,508 . Journalize the entry to record the first interest payment on October 1 and amortization of bond premium for six months, using the straigh remium amortization is combined with the semiannual interest payment. Round to the nearest dollar. If an amount box does not require Interest Expense Premium on Bonds Payable Cash . Why was the company able to issue the bonds for $8,316,508 rather than for the face amount of $8,000,000?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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