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 $7,700,000 of 4-year, 8% bonds at a market (effective) interest rate 6%, receiving cash of $8,240,517. 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 : blank. Cash ✓ Premium on Bonds Payable Bonds Payable Feedback ✓ Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond. b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for 6 months, using the straight-line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
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 $7,700,000 of 4-year, 8% bonds at a market (effective) interest rate 6%, receiving cash of $8,240,517. 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 : blank. Cash ✓ Premium on Bonds Payable Bonds Payable Feedback ✓ Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond. b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for 6 months, using the straight-line method. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.
Chapter1: Financial Statements And Business Decisions
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Bonds Payable
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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 $7,700,000 of 4-year, 8% bonds at a market (effective) interest rate of
6%, receiving cash of $8,240,517. 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.
✓
Interest Expense
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Premium on Bonds Payable
Cash
al. Mu Merk
Show Me How
Check My Work
Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account.
The straight-line method of amortization provides equal amounts of amortization over the life of the bond.
GDD
b. Journalize the entry to record the first interest payment on October 1, 20Y1, and amortization of bond premium for 6 months, using the straight-line method. Round to the
nearest dollar. If an amount box does not require an entry, leave it blank.
✓
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Cash
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Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account.
The straight-line method of amortization provides equal amounts of amortization over the life of the bond.
c. Why was the company able to issue the bonds for $8,240,517 rather than for the face amount of $7,700,000?
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The market rate of interest is less than
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✔the contract rate of interest.
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Bonds will be issued for either a higher or lower amount than the face value when the market and contract rates of interest are different.
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