On the first day of its fiscal year, Chin Company issued $17,800,000 of five-year, 12% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 14%, resulting in Chin receiving cash of $16,549,813. a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) If an amount box does not require an entry, leave it blank. 1. Cash Discount on Bonds Payable Bonds Payable 2. Interest Expense Discount on Bonds Payable Cash 3. Interest Expense Discount on Bonds Payable Cash b. Determine the amount of the bond interest expense for the first year.
On the first day of its fiscal year, Chin Company issued $17,800,000 of five-year, 12% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 14%, resulting in Chin receiving cash of $16,549,813. a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) If an amount box does not require an entry, leave it blank. 1. Cash Discount on Bonds Payable Bonds Payable 2. Interest Expense Discount on Bonds Payable Cash 3. Interest Expense Discount on Bonds Payable Cash b. Determine the amount of the bond interest expense for the first year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method
On the first day of its fiscal year, Chin Company issued $17,800,000 of five-year, 12% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 14%, resulting in Chin receiving cash of $16,549,813.
a.
- Issuance of the bonds.
- First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
- Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
If an amount box does not require an entry, leave it blank.
| 1. | Cash |
| Discount on Bonds Payable | |
| Bonds Payable | |
| 2. | Interest Expense |
| Discount on Bonds Payable | |
| Cash | |
| 3. | Interest Expense |
| Discount on Bonds Payable | |
| Cash |
b. Determine the amount of the bond interest expense for the first year.
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