X EX 11-3 Entries for issuing bonds and amortizing discount by straight-line method On the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% 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 $9,594,415. a. Journalize the entries to record the following: Obj. 2 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. Round to the nearest dollar. 3. Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. Round to the nearest dollar. b. Determine the amount of the bond interest expense for the first year. Explain why the company was able to issue the bonds for only $9,594,415 rather C. than for the face amount of $10,000,000.
X EX 11-3 Entries for issuing bonds and amortizing discount by straight-line method On the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% 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 $9,594,415. a. Journalize the entries to record the following: Obj. 2 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. Round to the nearest dollar. 3. Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. Round to the nearest dollar. b. Determine the amount of the bond interest expense for the first year. Explain why the company was able to issue the bonds for only $9,594,415 rather C. than for the face amount of $10,000,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Chapter 11
Liabilities: Bonds Payable
Exercises
Obj. 1
EX 11-1 Bond price
United States Steel Corporation's (X) 7.5% bonds due in 2022 were reported as selling for 102
Were the bonds selling at a premium or at a discount? Why is United States Steal3.2.
REAL WORLD
to sell its bonds at this price?
Obj. 2
EX 11-2 Entries for issuing bonds
Thomson Co. produces and distributes semiconductors for use by computer manufacture
Thomson issued $800,000 of 10-year, 6% bonds on May 1 of the current year at face value, with
interest payable on May 1 and November 1. The fiscal year of the company is the calendar venn
Journalize the entries to record the following selected transactions for the current year:
SHOW ME HOW
May 1. Issued the bonds for cash at their face amount.
Nov. 1. Paid the interest on the bonds.
Dec. 31. Recorded accrued interest for two months.
XEX 11-3 Entries for issuing bonds and amortizing discount by straight-line method
On the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% 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 $9,594,415.
Obj. 2
V b. $781,118
SHOW ME HOW
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 to the nearest dollar,
3. Second semiannual interest payment. The bond discount is combined with the semiannual
interest payment. Round to the nearest dollar,
b. Determine the amount of the bond interest expense for the first year.
Explain why the company was able to issue the bonds for only $9,594,415 rather
C.
than for the face amount of $10,000,000.
EX 11-4 Entries for issuing bonds and amortizing premium by straight-line method
Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 201,
Smiley issued $20,000,000 of five-year, 9% bonds at a market (effective) interest rate of 8%, receV-
ing cash of $20,811,010. Interest is payable semiannually on Anril 1
the entries to record the following
Obj. 2
SHOW ME HOW
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