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On the first day of its fiscal year, Chin Company issued $27,500,000 of five-year, 8% 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 9%, resulting in Chin receiving cash of $26,412,067. 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 26,412,067 V Discount on Bonds Payable 1,087,933 Bonds Payable 27,500,000 2. Interest Expense Discount on Bonds Payable 120,881.44

On the first day of its fiscal year, Chin Company issued $27,500,000 of five-year, 8% 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 9%, resulting in Chin receiving cash of $26,412,067. 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 26,412,067 V Discount on Bonds Payable 1,087,933 Bonds Payable 27,500,000 2. Interest Expense Discount on Bonds Payable 120,881.44

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
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 $27,500,000 of five-year, 8% 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 9%, resulting in Chin receiving cash of $26,412,067. **a. Journalize the entries to record the following:** 1. **Issuance of the bonds.** - Cash: $26,412,067 - Discount on Bonds Payable: $1,087,933 - Bonds Payable: $27,500,000 2. **First semiannual interest payment.** The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) - Interest Expense: - Discount on Bonds Payable: - Cash: 3. **Second semiannual interest payment.** The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) - Interest Expense: - Discount on Bonds Payable: - Cash: *Note: If an amount box does not require an entry, leave it blank.* **b. Determine the amount of the bond interest expense for the first year.** - Amount: $__________ **Explanation:** The image includes entries for recording financial transactions related to bond issuance and interest payments, following the straight-line amortization method. The first entry records the cash received, bond payable, and the discount on bonds payable. Semiannual interest payment entries are indicated but not filled in. There is a feedback section and a task to determine the bond interest expense for the year.
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 $27,500,000 of five-year, 8% 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 9%, resulting in Chin receiving cash of $26,412,067. **a. Journalize the entries to record the following:** 1. **Issuance of the bonds.** - Cash: $26,412,067 - Discount on Bonds Payable: $1,087,933 - Bonds Payable: $27,500,000 2. **First semiannual interest payment.** The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) - Interest Expense: - Discount on Bonds Payable: - Cash: 3. **Second semiannual interest payment.** The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) - Interest Expense: - Discount on Bonds Payable: - Cash: *Note: If an amount box does not require an entry, leave it blank.* **b. Determine the amount of the bond interest expense for the first year.** - Amount: $__________ **Explanation:** The image includes entries for recording financial transactions related to bond issuance and interest payments, following the straight-line amortization method. The first entry records the cash received, bond payable, and the discount on bonds payable. Semiannual interest payment entries are indicated but not filled in. There is a feedback section and a task to determine the bond interest expense for the year.
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