Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the

Question

Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $24,100,000 of five-year, 9% 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 11%, resulting in Chin receiving cash of $22,283,423. 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. Round your answers to the nearest dollar. 1. 2. 3. b. Determine the amount of the bond interest expense for the first year.

Explanation / Answer

Question no.1

a. Journal

Question no.2

a. Journal

b. Journal

c. lower than

Question no. 3

1. Journal

2. Journal

a.

b.

3. Total interest expense for year 1 = $128836 + $128836 = $257672

4. Yes

5.

Present value of the face amount = $2300000 x PV6%,18 = $2300000 x 0.35034 = $805782

Present value of semi-annual interest payments = $115000 x PVA6%,18 = $115000 x 10.82760 = $1245174

Price received for the bonds = $805782 + $1245174 = $2050956

No. Account Name Debit Credit 1. Cash 22283423 Discount on bonds payable 1816577 Bonds payable 24100000 (To record issuance of bonds) 2. Interest expense 1266158 Discount on bonds payable (1816577/ 10) 181658 Cash (24100000 x 9% x 1/2) 1084500 (To record interest payment) 3. Interest expense 1266158 Discount on bonds payable (1816577/ 10) 181658 Cash (24100000 x 9% x 1/2) 1084500 (To record interest payment)

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.