Entries for issuing bonds and amortizing premium by straight-line method Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 2011, Smiley issued $20,000,000 of five-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $20,811,010. Interest is payable semiannually on April 1 and October 1. Journalize the entries to record the following: a. Issuance of bonds on April 1, 2011.b. First interest payment on October 1, 2011, and amortization of bondpremium for six months, using the straight-line method.c. Explain why the company was able to issue the bonds for $20,811,010 rather than for die face amount of $20,000,000.
Entries for issuing bonds and amortizing premium by straight-line method Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 2011, Smiley issued $20,000,000 of five-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $20,811,010. Interest is payable semiannually on April 1 and October 1. Journalize the entries to record the following: a. Issuance of bonds on April 1, 2011.b. First interest payment on October 1, 2011, and amortization of bondpremium for six months, using the straight-line method.c. Explain why the company was able to issue the bonds for $20,811,010 rather than for die face amount of $20,000,000.
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, 2011, Smiley issued $20,000,000 of five-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $20,811,010. Interest is payable semiannually on April 1 and October 1.
a. Issuance of bonds on April 1, 2011.
b. First interest payment on October 1, 2011, and amortization of bond
premium for six months, using the straight-line method.
c. Explain why the company was able to issue the bonds for $20,811,010 rather than for die face amount of $20,000,000.
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