interest rate of 5%, receiving cash of $9,080,714. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 2011. If an amount box does not require an entry, leave it blank. Premium on Bonds Payable Bonds Payable Feedback Check My Work 9,080,714 380,714 8,700,000
interest rate of 5%, receiving cash of $9,080,714. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1, 2011. If an amount box does not require an entry, leave it blank. Premium on Bonds Payable Bonds Payable Feedback Check My Work 9,080,714 380,714 8,700,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 $8,700,000 of 5-year, 6% bonds at a market (effective)
interest rate of 5%, receiving cash of $9,080,714. 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.
Cash
Premium on Bonds Payable
Bonds Payable
✓
Feedback
Check My Work
Interest Expense
Premium on Bonds Payable
Cash
b. Journalize the entry to record the first interest payment on October 1, 2011, 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
Feedback
9,080,714
Check My Work
380,714
8,700,000
88.
261,000
c. Why was the company able to issue the bonds for $9,080,714 rather than for the face amount of $8,700,000?
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