Question

Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $16,600,000 of five-year, 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 12%, resulting in Chin Company receiving cash of $15,989,036. 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.

Answer 1

Answer:

The answer to the question is as attached  

Explanation:

a. The total credit matches the debit in a total of  $16,600,000

b. Cash $15989036    

Discount on bonds payable (16600000 -15989036)    $610964

Bonds payable  $16600000

(To record issuance of bonds)  

b) Interest expense 825000+610964= $1435964

Discount on bonds payable 610964/11=  $55542

Cash 16600000*11%*6/12=   $913000‬

(To record discount amortized and interest paid)  

c) Interest expense 825000+55542=  $880542  

Discount on bonds payable 610964/11=   $55542

Cash 16600000*11%*6/12=   $913000