Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Jacinto Company issued $21,200,000 of five-year, 12% 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 14%, resulting in Jacinto Company receiving cash of $19,711,014. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. 3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. If an amount box does not require an entry, leave blank. Round your answers to the nearest dollar. 1. 2. 3. b. Dete $ ▾ ▼ the amount of the bond interest expense for the Round your the nearest doll c. Why was the company able to issue the bonds for only $19,711,014 rather than for the face amount of $21,200,000? The market rate of interest is the contract rate of interest.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method
On the first day of its fiscal year, Jacinto Company issued $21,200,000 of five-year, 12% 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 14%, resulting in Jacinto Company receiving cash of $19,711,014.
a. Journalize the entries to record the following:
1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment.
3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment.
If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.
1.
2.
3.
b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar.
c. Why was the company able to issue the bonds for only $19,711,014 rather than for the face amount of $21,200,000?
The market rate of interest is
the contract rate of interest.
Transcribed Image Text:Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Jacinto Company issued $21,200,000 of five-year, 12% 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 14%, resulting in Jacinto Company receiving cash of $19,711,014. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. 3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. 1. 2. 3. b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar. c. Why was the company able to issue the bonds for only $19,711,014 rather than for the face amount of $21,200,000? The market rate of interest is the contract rate of interest.
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