Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Jacinto Company issued $22,100,000 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 5%, resulting in Jacinto Company receiving cash of $21,132,931. Question Content Area a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. 1. - Select - - Select - - Select - - Select - - Select - - Select - 2. - Select - - Select - - Select - - Select - - Select - - Select - 3. - Select - - Select - - Select - - Select - - Select - - Select - Question Content Area b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar. $fill in the blank e54698fcbf9afe0_1 c. Why was the company able to issue the bonds for only $21,132,931 rather than for the face amount of $22,100,000? The market rate of interest is the contract rate of interest.

Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Jacinto Company issued $22,100,000 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 5%, resulting in Jacinto Company receiving cash of $21,132,931. Question Content Area a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. 1. - Select - - Select - - Select - - Select - - Select - - Select - 2. - Select - - Select - - Select - - Select - - Select - - Select - 3. - Select - - Select - - Select - - Select - - Select - - Select - Question Content Area b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar. $fill in the blank e54698fcbf9afe0_1 c. Why was the company able to issue the bonds for only $21,132,931 rather than for the face amount of $22,100,000? The market rate of interest is the contract rate of interest.

Financial Accounting: The Impact on Decision Makers

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.2P

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

On the first day of its fiscal year, Jacinto Company issued $22,100,000 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 5%, resulting in Jacinto Company receiving cash of $21,132,931.

Question Content Area

a. Journalize the entries to record the following:

Issuance of the bonds.
First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment.
Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment.

If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.

1.		- Select -	- Select -
		- Select -	- Select -
		- Select -	- Select -
2.		- Select -	- Select -
		- Select -	- Select -
		- Select -	- Select -
3.		- Select -	- Select -
		- Select -	- Select -
		- Select -	- Select -

Question Content Area

b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar.
$fill in the blank e54698fcbf9afe0_1

c. Why was the company able to issue the bonds for only $21,132,931 rather than for the face amount of $22,100,000?
The market rate of interest is

the contract rate of interest.

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Edward Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable semiannually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. Dec. 31, 2018: entry to record payment of interest to bondholders C. Dec. 31, 2018: entry to record amortization of discount
MASTERY PROBLEM Jackson, Inc.s fiscal year ends December 31. Selected transactions for the period 20-1 through 20-8 involving bonds payable issued by Jackson are as follows: 20-1 Oct. 31 Issued 600,000 of 10-year, 7%, callable bonds dated October 31, 20-1, for 612,000. Interest is payable semiannually on October 31 and April 30. The bond indenture provides that Jackson is to pay to the trustee bank 20,000 by May 15 of each year (except the tenth year) as a sinking fund for the retirement of the bonds on call or at maturity. Dec. 31 Made the adjusting entry for interest payable and amortized two months premium on the bonds (straight-line method). 20-2 Jan. 2 Reversed the adjusting entry for interest payable and bond premium amortization. Apr. 30 Paid the semiannual interest on the bonds and amortized six months premium. May 15 Paid the sinking fund trustee 20,000. Oct. 31 Paid the semiannual interest on the bonds and amortized six months premium. Dec. 31 Made the adjusting entry for interest payable and amortized two months premium on the bonds. 31 Sinking fund earnings for the year were 900. 20-8 May 15 Paid the sinking fund trustee 20,000. Oct. 31 Paid the semiannual interest on the bonds and amortized six months premium. 31 Redeemed the bonds, which were called at 97. The balance in the bond premium account is 3,600 after the payment of interest and amortization of premium have been entered. The cash balance in the sinking fund is 200,000, which is applied to the redemption. Jackson paid the sinking fund trustee the additional cash needed to pay off the bonds. (Hint: First make the entry for payment to the sinking fund, then make the entry for redemption of the bonds.) REQUIRED 1. Enter the preceding transactions in general journal form. 2. Calculate the carrying value of the bonds as of December 31, 20-2.
Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1, 2018 and received $480,000. Interest is payable annually. The discount is amortized using the straight-line method. Prepare journal entries for the following transactions. A. July 1, 2018: entry to record issuing the bonds B. June 30, 2019: entry to record payment of interest to bondholders C. June 30, 2019: entry to record amortization of discount D. June 30, 2020: entry to record payment of interest to bondholders E. June 30, 2020: entry to record amortization of discount

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