On the first day of its fiscal year, Chin Company issued $21,300,000 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 13%, resulting in Chin receiving cash of $19,768,863. B. Determine the amount of the bond interest expense for the first year. $fill in the blank fb16b3fe6fc4fc2_1 c. Why was the company able to issue the bonds for only $19,768,863 rather than for the face amount of $21,300,000? The market rate of interest is _______________ the contract rate of interest. Therefore, inventors ________________ willing to pay the full face amount of the bonds.
Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method
On the first day of its fiscal year, Chin Company issued $21,300,000 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 13%, resulting in Chin receiving cash of $19,768,863.
B. Determine the amount of the bond interest expense for the first year.
$fill in the blank fb16b3fe6fc4fc2_1
c. Why was the company able to issue the bonds for only $19,768,863 rather than for the face amount of $21,300,000?
The market rate of interest is _______________ the contract rate of interest. Therefore, inventors ________________ willing to pay the full face amount of the bonds.
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