On the first day of its fiscal year, Chin Company issued $27,500,000 of five-year, 8% 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 9%, resulting in Chin receiving cash of $26,412,067. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 3. 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 26,412,067 V Discount on Bonds Payable 1,087,933 Bonds Payable 27,500,000 2. Interest Expense Discount on Bonds Payable 120,881.44

Principles of Accounting Volume 1
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ISBN:9781947172685
Author:OpenStax
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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 $27,500,000 of five-year, 8% 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 9%, resulting in Chin receiving cash of $26,412,067.
a. Journalize the entries to record the following:
1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
3. 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
26.412,067
Discount on Bonds Payable
1,087,933
Bonds Payable
27,500,000
2. Interest Expense
Discount on Bonds Payable
120,881.44 X
Cash
3. Interest Expense
Discount on Bonds Payable
Cash
Feedback
b. Determine the amount of the bond interest expense for the first year.
Transcribed Image Text:Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $27,500,000 of five-year, 8% 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 9%, resulting in Chin receiving cash of $26,412,067. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 3. 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 26.412,067 Discount on Bonds Payable 1,087,933 Bonds Payable 27,500,000 2. Interest Expense Discount on Bonds Payable 120,881.44 X Cash 3. Interest Expense Discount on Bonds Payable Cash Feedback b. Determine the amount of the bond interest expense for the first year.
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