Financial And Managerial Accounting
Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
Question
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Chapter 11, Problem 4E

a.

To determine

Prepare journal entry to record the issuance of the bonds.

b.

To determine

Prepare journal entry to record first interest payment and amortization of premium on bonds.

c.

To determine

Explain the reason why the company was able to issue the bonds for $20,811,010 rather than $20,000,000.

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Entries for issuing bonds and amortizing premium by straight-line method Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $6, 100,000 of 8-year, 7% bonds at a market (effective) interest rate of 4%, receiving cash of $7, 342, 360. Interest is payable semiannually on April 1 and October 1. Question Content Area 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. blankAccountDebitCredit blank Question Content Area b. Journalize the entry to record the first interest payment on October 1, 20Y1, 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. blankAccount DebitCredit blank Question Content Area c. Why was the company able to issue the bonds for $7, 342, 360 rather than for the face amount of $6, 100,000? The market rate of interest is…
Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Favreau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Favreau Corporation issued $3,900,000 of 7-year, 12% bonds at a market (effective) interest rate of 11%, receiving cash of $4,086,999. Interest is payable semiannually on April 1 and October 1. a. Journalize the entry to record the issuance of bonds on April 1. If an amount box does not require an entry, leave it blank. Cash Premium on Bonds Payable Bonds Payable b. Journalize the entry to record the first interest payment on October 1 and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual interest payment. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Premium on Bonds Payable Cash

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Financial And Managerial Accounting

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