Favreau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Favreau Corporation issued $1,200,000 of 8-year, 6% bonds at a market (effective) interest rate of 4%, receiving cash of $1,362,933. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1. If an amount box does not require an entry, leave it blank. - Select - - Select - - Select - - Select - - Select - - Select - b. Journalize the entry to record the first interest payment on October 1 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. If an amount box does not require an entry, leave it blank. - Select - - Select - - Select - - Select - - Select - - Select - c. Why was the company able to issue the bonds for $1,362,933 rather than for the face amount of $1,200,000? The market rate of interest is the contract rate of interest.
Favreau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Favreau Corporation issued $1,200,000 of 8-year, 6% bonds at a market (effective) interest rate of 4%, receiving cash of $1,362,933. Interest is payable semiannually on April 1 and October 1.
a.
|
|
- Select - | - Select - | |
|
|
- Select - | - Select - | |
|
|
- Select - | - Select - |
b. Journalize the entry to record the first interest payment on October 1 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. If an amount box does not require an entry, leave it blank.
|
|
- Select - | - Select - | |
|
|
- Select - | - Select - | |
|
|
- Select - | - Select - |
c. Why was the company able to issue the bonds for $1,362,933 rather than for the face amount of $1,200,000?
The market rate of interest is
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
