Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $7,800,000 of 4-year, 12% bonds at a market (effective) interest rate of 11%, receiving cash of $8,047,047. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 20Y1. If an amount box does not require an entry, leave it blank. fill in the blank d175d3f50fce054_2 fill in the blank d175d3f50fce054_3 fill in the blank d175d3f50fce054_5 fill in the blank d175d3f50fce054_6 fill in the blank d175d3f50fce054_8 fill in the blank d175d3f50fce054_9 b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for six months, using the straight-line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. fill in the blank 619c04ffefcc070_2 fill in the blank 619c04ffefcc070_3 fill in the blank 619c04ffefcc070_5 fill in the blank 619c04ffefcc070_6 fill in the blank 619c04ffefcc070_8 fill in the blank 619c04ffefcc070_9 c. Why was the company able to issue the bonds for $8,047,047 rather than for the face amount of $7,800,000? 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

Section: Chapter Questions

Problem 1Q

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Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method

Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $7,800,000 of 4-year, 12% bonds at a market (effective) interest rate of 11%, receiving cash of $8,047,047. Interest is payable semiannually on April 1 and October 1.

a. Journalize the entry to record the issuance of bonds on April 1, 20Y1. If an amount box does not require an entry, leave it blank.

		fill in the blank d175d3f50fce054_2	fill in the blank d175d3f50fce054_3
		fill in the blank d175d3f50fce054_5	fill in the blank d175d3f50fce054_6
		fill in the blank d175d3f50fce054_8	fill in the blank d175d3f50fce054_9

b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for six months, using the straight-line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

		fill in the blank 619c04ffefcc070_2	fill in the blank 619c04ffefcc070_3
		fill in the blank 619c04ffefcc070_5	fill in the blank 619c04ffefcc070_6
		fill in the blank 619c04ffefcc070_8	fill in the blank 619c04ffefcc070_9

c. Why was the company able to issue the bonds for $8,047,047 rather than for the face amount of $7,800,000?

The market rate of interest is the contract rate of interest.

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