Question
In: Accounting
On the first day of its fiscal year, Chin Company issued $16,800,000 of five-year, 4% bonds...
On the first day of its fiscal year, Chin Company issued $16,800,000 of five-year, 4% 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 6%, resulting in Chin Company receiving cash of $15,366,859.
a. Journalize the entries to record the following:
Issuance of the bonds.
First semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
Second semiannual interest payment. The bond discount amortization, using the straight-line method, 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.
| 1. | |||
| 2. | |||
| 3. | |||
b. Determine the amount of the bond interest
expense for the first year.
$
c. Why was the company able to issue the bonds
for only $15,366,859 rather than for the face amount of
$16,800,000?
The market rate of interest is the contract rate of interest.
Solutions
Expert Solution
| A) | Journal Entries | |||||||||
| Date | Account titles & Explanations | Debit | Credit | |||||||
| 1-Jan | Cash | 15,366,859 | ||||||||
| Discount on bonds payable | 1,433,141 | |||||||||
| Bonds payable | 16,800,000 | |||||||||
| 30-Jun | interest expense | 479314 | ||||||||
| discount on bonds payable | (1433141/10) | 143314 | ||||||||
| Cash | (16,800,000*4%*1/2) | 336000 | ||||||||
| 31-Dec | interest expense | 479314 | ||||||||
| discount on bonds payable | 143314 | |||||||||
| Cash | 336000 | |||||||||
| b) | Amount of interest expense for the year | 958628 | ||||||||
| c) | the market rate of 6% is higher than the contract rate of 4% | |||||||||
ekkarill92 answered 2 years agoRelated Solutions
On January 1, the first day of its fiscal year, Chin Company issued $10,000,000 of five-year,...
On January 1, 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 Company receiving cash of
$9,594,415.
Required:
A.
Journalize the entries to
record the following (refer to the Chart of Accounts for exact
wording of account titles):
1.
Issuance of the
bonds.
2....
On January 1, the first day of its fiscal year, Pretender Company issued $18,500,000 of five-year,...
On January 1, the first day of its fiscal year, Pretender
Company issued $18,500,000 of five-year, 10% 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 12%, resulting in Pretender Company
receiving cash of $17,138,298.
Required:
A.
Journalize the entries to
record the following (refer to the Chart of Accounts for exact
wording of account titles):
1.
Issuance of the
bonds.
2....
On January 1, the first day of its fiscal year, Pretender Company issued $18,400,000 of five-year,...
On January 1, the first day of its fiscal year, Pretender
Company issued $18,400,000 of five-year, 12% 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 14%, resulting in Pretender Company
receiving cash of $17,107,672.
Required:
A.
Journalize the entries to
record the following (refer to the Chart of Accounts for exact
wording of account titles):
1.
Issuance of the
bonds.
2....
On the first day of its fiscal year, Ebert Company issued $17,000,000 of 5-year, 10% bonds...
On the first day of its fiscal year, Ebert Company issued
$17,000,000 of 5-year, 10% bonds to finance its operations.
Interest is payable semiannually. The bonds were issued at a market
(effective) interest rate of 11%, resulting in Ebert Company
receiving cash of $16,359,296. The company uses the interest
method.
a. Journalize the entries to record the following:
1. Sale of the bonds. Round amounts to the nearest dollar. For a
compound transaction, if an amount box does not require...
On January 1, the first day of the fiscal year pretenders company issued $24,200 of five...
On
January 1, the first day of the fiscal year pretenders company
issued $24,200 of five years, 11% 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 13% resulting in pretender company
receiving cash of $22,460,399
A. Journalize the entries to record the following
1. Issuance of the bond
2. First semiannual interest payment. The bond discount is
combined with the...
Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued...
Amortize Discount by Interest Method
On the first day of its fiscal year, Ebert Company issued
$50,000,000 of 10-year, 7% bonds to finance its operations.
Interest is payable semiannually. The bonds were issued at a market
(effective) interest rate of 9%, resulting in Ebert Company
receiving cash of $43,495,895. The company uses the interest
method.
b. Compute the amount of the bond interest
expense for the first year. Round amounts to the nearest
dollar.
Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued...
Amortize Discount by Interest Method
On the first day of its fiscal year, Ebert Company issued
$18,000,000 of 5-year, 10% bonds to finance its operations.
Interest is payable semiannually. The bonds were issued at a market
(effective) interest rate of 12%, resulting in Ebert Company
receiving cash of $16,675,281. The company uses the interest
method.
a. Journalize the entries to record the following:
1. Sale of the bonds. Round amounts to the nearest dollar. For a
compound transaction, if an...
On the first day of the fiscal year, Shiller Company borrowed $85,000 by giving a seven–year
On the first day of the fiscal year, Shiller Company borrowed $85,000 by giving a seven–year, 7% installment note to Soros Bank. The note requires annual payments of $15,772, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $5,950 and principal repayment of $9,822.Journalize the entries to record the following:a1. Issued the installment note for cash on the first day of the fiscal year.a2. Paid the first annual payment...
On the first day of the fiscal year, a company issues a $3,200,000, 9%, 10-year bond...
On the first day of the fiscal year, a company issues a
$3,200,000, 9%, 10-year bond that pays semiannual interest of
$144,000 ($3,200,000 × 9% × ½), receiving cash of $2,649,441.
Journalize the first interest payment and the amortization of
the related bond discount. Round to the nearest dollar. If an
amount box does not require an entry, leave it blank.
On the first day of the fiscal year, a company issues a $2,000,000, 9%, 5-year bond...
On the first day of the fiscal year, a company issues a
$2,000,000, 9%, 5-year bond that pays semiannual interest of
$90,000 ($2,000,000 × 9% × ½), receiving cash of $1,922,782.
Journalize the first interest payment and the amortization of
the related bond discount. Round to the nearest dollar. If an
amount box does not require an entry, leave it blank.
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Which subnet (network address) does host 25.17.102.51 255.255.248.0 belong to?
- Joe Dokes retired today with $1,000,000 in his retirement nest egg. If he followed a cash...
- how is biopsychosocial compatiable model in the future.
- Give at least 5 nursing interventions (with rationale) of nursing diagnosis: Health-seeking behaviors related to patient’s...
- The Wall Street Wizard Co. sold a stock market investing plan through the mail that made...
- Rotating bits in C This rotates bits to the left which means the bits that were...
- Implement a method that meets the following requirements: (a) Takes as parameter 1) an int array...
ADVERTISEMENT