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On the first day of its fiscal year, Chin Company issued $24,000,000 of 5-year, 6% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. Th were issued at a market (effective) interest rate of 8%, resulting in Chin receiving cash of $22,053,288. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 3. 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 ✓ ✓ 000 22,053,288 1,946,712 X 000 24,000,000

On the first day of its fiscal year, Chin Company issued $24,000,000 of 5-year, 6% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. Th were issued at a market (effective) interest rate of 8%, resulting in Chin receiving cash of $22,053,288. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 3. 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 ✓ ✓ 000 22,053,288 1,946,712 X 000 24,000,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 $24,000,000 of 5-year, 6% 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 8%, resulting in Chin receiving cash of $22,053,288. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual Interest payment. (Round your answer to the nearest dollar.) 3. 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 • ✓ ✓ ✓ 000 000 000 22,053,288 1,946,712 X 000 000 000 24,000,000
Transcribed Image Text:Entries for issuing bonds and amortizing discount by straight-line method On the first day of its fiscal year, Chin Company issued $24,000,000 of 5-year, 6% 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 8%, resulting in Chin receiving cash of $22,053,288. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual Interest payment. (Round your answer to the nearest dollar.) 3. 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 • ✓ ✓ ✓ 000 000 000 22,053,288 1,946,712 X 000 000 000 24,000,000
b. Determine the amount of the bond interest expense for the first year. c. Why was the company able to issue the bonds for only $22,053,288 rather than for the face amount of $24,000,000? The market rate of interest is greater than ✔the contract rate of interest. Therefore, Inventors are not ✔willing to pay the full face amount of the bonds.
Transcribed Image Text:b. Determine the amount of the bond interest expense for the first year. c. Why was the company able to issue the bonds for only $22,053,288 rather than for the face amount of $24,000,000? The market rate of interest is greater than ✔the contract rate of interest. Therefore, Inventors are not ✔willing to pay the full face amount of the bonds.
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