Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the
ID: 2433075 • Letter: E
Question
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 in Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 8%, resulting in Cin receiving cash of S9,594,4 15. over ent pr ts 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.) For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. ,594,415 405585 1-Cash Discount on Bonds Payable Bonds Payable 0,000,000 2. Interest Expense Discount on Bonds Payable 405585 X Cash 50,000 Interest tapane Discount on Bonds Payable Cash 3, Interest ExpenseExplanation / Answer
Journal entries: Date Accounts title and explanation Debit $ Credit $ 1 Cash account Dr. 9,594,415 Discount on bonds payable Dr. 405,585 Bonds payable account 10,000,000 2 Interest expense Account Dr. 390559 Cash account (10000,000*7%*6/12) 350000 Discount on Bonds payable (405585/10) 40559 3 Interest expense Account Dr. 390559 Cash account (10000,000*7%*6/12) 350000 Discount on Bonds payable (405585/10) 40559 Req b: Total Interest expense for the First year: Total cash interest paid (350000*2): 700000 Discount amortized (405585/10*2) 81118 Total Interest expense for the First year: 781118 Req c: The market rate of interest is higher than contract rate of interest
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