Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Daan Corporation issued $1,100,000 of 5-year, 11% bonds at a market (effective) interest rate of 10%, receiving cash of $1,142,469. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 2016. For a compound transaction, if an amount box does not require an entry, leave it blank. b. Journalize the entry to record the first interest payment on October 1, 2016, and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual interest payment. (Round to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank. C. Why was the company able to issue the bonds for $1,142,469 rather than for the face amount of $1,100,000? The market rate of interest is the contract rate of interest.

Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter14: Long-term Liabilities: Bonds And Notes
Section: Chapter Questions
Problem 6PA: Saverin, Inc. produces and sells outdoor equipment. On July 1, 2016, Saverin, Inc. issued 62,500,000...
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How do I journalize using the straight line method

Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Daan Corporation issued $1,100,000 of 5-year, 11% bonds at a market (effective) interest rate of 10%, receiving cash of $1,142,469.
Interest is payable semiannually on April 1 and October 1.
a. Journalize the entry to record the issuance of bonds on April 1, 2016. For a compound transaction, if an amount box does not require an entry, leave it blank.
b. Journalize the entry to record the first interest payment on October 1, 2016, and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual
interest payment. (Round to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank.
C. Why was the company able to issue the bonds for $1,142,469 rather than for the face amount of $1,100,000?
The market rate of interest is
the contract rate of interest.
Transcribed Image Text:Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Daan Corporation issued $1,100,000 of 5-year, 11% bonds at a market (effective) interest rate of 10%, receiving cash of $1,142,469. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 2016. For a compound transaction, if an amount box does not require an entry, leave it blank. b. Journalize the entry to record the first interest payment on October 1, 2016, and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual interest payment. (Round to the nearest dollar.) For a compound transaction, if an amount box does not require an entry, leave it blank. C. Why was the company able to issue the bonds for $1,142,469 rather than for the face amount of $1,100,000? The market rate of interest is the contract rate of interest.
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