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 $10,200,000 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 9%, resulting in Chin receiving cash of $9,392,927.

a. Journalize the entries to record the following:

Issuance of the bonds.

First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)

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.

NEED #3 AMOUNTS, AND BELOW

b. Determine the amount of the bond interest expense for the first year.
$

1. Cash V 9,392,927 Discount on Bonds Payable 807,073 Bonds Payable 10,200,000 V Interest Expense 437,707 | 2. Discount on Bonds Payable 80,707 | 357,000 Cash 3. Interest Expense Discount on Bonds Payable Cash

Explanation / Answer

Req A: Journal entry 1 Cash account Dr. 9392927 Discount on Bonds payable 807073      Bonds payable 10,200,000 2 Interest expense Dr. 437707      Discount on bonds payable 80707       cash Account 357000 3 Interest expense Dr. 437707      Discount on bonds payable 80707       cash Account 357000 Note: As per Straight line amortization method, the inteest entry for second semi annual interest will remain. Req B: Total interest expense to be recorded in first year (437707+437707): $875,414

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