Amortize premium by interest method Shunda Corporation wholesales parts to appliance manufacturers. On January 1, Shunda issued $20,000,000 of 5-year, 10% bonds at a market (effective) interest rate of 8%, receiving cash of $21,622,179. Interest is payable semiannually. Shunda's fiscal year begins on January 1. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 88 Cash Interest Expense Bonds Payable Feedback Check My Work X 2. First semiannual interest payment, including amortization of premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Discount on Bonds Payable Discount on Bonds Payable Cash Feedback X X 000 000
Amortize premium by interest method Shunda Corporation wholesales parts to appliance manufacturers. On January 1, Shunda issued $20,000,000 of 5-year, 10% bonds at a market (effective) interest rate of 8%, receiving cash of $21,622,179. Interest is payable semiannually. Shunda's fiscal year begins on January 1. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 88 Cash Interest Expense Bonds Payable Feedback Check My Work X 2. First semiannual interest payment, including amortization of premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Discount on Bonds Payable Discount on Bonds Payable Cash Feedback X X 000 000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Amortize premium by interest method
Shunda Corporation wholesales parts to appliance manufacturers. On January 1, Shunda issued $20,000,000 of 5-year, 10% bonds at a market (effective) interest rate of
8%, receiving cash of $21,622,179. Interest is payable semiannually. Shunda's fiscal year begins on January 1. The company uses the interest method.
a. Journalize the entries to record the following:
1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
88
Cash
Interest Expense
Bonds Payable
Feedback
Check My Work
X
2. First semiannual interest payment, including amortization of premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Discount on Bonds Payable
Discount on Bonds Payable
Cash
Feedback
X
X
000
000

Transcribed Image Text:3. Second semiannual interest payment, including amortization of premium. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Discount on Bonds Payable
Discount on Bonds Payable X
Feedback
Check My Work
As the discount or premium is amortized, the carrying amount of the bond changes. As a result, interest expense also changes each period.
Compare the rate on the bonds and the market rate.
b. Determine the bond interest expense for the first year. Round to the nearest dollar.
Annual interest paid
Less premium amortized
Interest expense for first year
Feedback
Check My Work
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