Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Favreau Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Favreau Corporation issued $3,600,000 of 6-year, 8% bonds at a market (effective) interest rate of 6%, receiving cash of $3,958,346. Interest is payable semiannually on April 1 and October 1. Question Content Area a. Journalize the entry to record the issuance of bonds on April 1. If an amount box does not require an entry, leave it blank. - Select - - Select - - Select - - Select - - Select - - Select - Question Content Area b. Journalize the entry to record the first interest payment on October 1 and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual interest payment. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. - Select - - Select - - Select - - Select - - Select - - Select - Question Content Area c. Why was the company able to issue the bonds for $3,958,346 rather than for the face amount of $3,600,000? The market rate of interest is the contract rate of interest.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5PA: Volunteer Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July...

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Question Content Area

a. Journalize the entry to record the issuance of bonds on April 1. If an amount box does not require an entry, leave it blank.

		- Select -	- Select -
		- Select -	- Select -
		- Select -	- Select -

Question Content Area

b. Journalize the entry to record the first interest payment on October 1 and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual interest payment. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

		- Select -	- Select -
		- Select -	- Select -
		- Select -	- Select -

Question Content Area

c. Why was the company able to issue the bonds for $3,958,346 rather than for the face amount of $3,600,000?

The market rate of interest is

the contract rate of interest.

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