Entries for Issuing Bonds and Amortizing Discount by Straight-Line MethodOn the first day of its fiscal year, Chin Company issued $17,800,000 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 Chin receiving cash of $16,549,813.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.1.Cash Discount on Bonds Payable Bonds Payable 2.Interest Expense Discount on Bonds Payable Cash 3.Interest Expense Discount on Bonds Payable Cash b. Determine the amount of the bond interest expense for the first year.

Semiannual interest payment = Face value of bonds x rate of interest x 6/12 = $17,800,000 x 12% x…

Answered: On the first day of its fiscal year,…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5PB: Dixon Inc. issued bonds with a $500,000 face value, 10% interest rate, and a 4-year term on July 1,...

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

On the first day of its fiscal year, Chin Company issued $17,800,000 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 Chin receiving cash of $16,549,813.

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.

1.	Cash
	Discount on Bonds Payable
	Bonds Payable
2.	Interest Expense
	Discount on Bonds Payable
	Cash
3.	Interest Expense
	Discount on Bonds Payable
	Cash

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

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