A. 1. Explanation Bonds: Bonds are long-term promissory notes that are represented by a company while borrowing money from investors to raise fund for financing the operations. Bonds Payable: Bonds payable are referred to long-term debts of the business, issued to various lenders known as bondholders, generally in multiples of $1,000 per bond, to raise fund for financing the operations. Discount on bonds payable: It occurs when the bonds are issued at a low price than the face value. ■ Cash is an asset and it is increased. So, debit it by $9,594,415.  Discount on Bonds Payable is an adjunct liability account and it is decreased. So, debit it by $404,585. ■ Bonds payable is a liability and it is increased. So, credit it by $10,000,000. Working note: Calculate discount on bonds payable... B. To determine Determine the amount of bond interest expense for first year. C . To determine Explain the reason why the company was able to issue the bonds for $9,594,415 rather than $10,000,000.

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ISBN: 9781337902663

Author: WARREN, Carl S.

Publisher: Cengage Learning,

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Question

Chapter 11, Problem 3E

To determine

Prepare journal entry to record issuance of the bonds.

To determine

Determine the amount of bond interest expense for first year.

To determine

Explain the reason why the company was able to issue the bonds for $9,594,415 rather than $10,000,000.

Expert Solution & Answer

Chapter 11 Solutions

Financial And Managerial Accounting

Ch. 11 - Describe the two distinct obligations incurred by...Ch. 11 - Explain the meaning of each of the following terms...Ch. 11 - If you asked your broker to purchase for you a 12%...Ch. 11 - Prob. 4DQ Ch. 11 - Prob. 5DQ Ch. 11 - Prob. 6DQ Ch. 11 - Prob. 7DQ Ch. 11 - Fleeson Company needs additional funds to purchase...Ch. 11 - Prob. 9DQ Ch. 11 - Issuing bonds at face amount On January 1, the...

Ch. 11 - Issuing bonds at a discount On the first day of...Ch. 11 - Prob. 3BE Ch. 11 - Prob. 4BE Ch. 11 - Prob. 5BE Ch. 11 - Prob. 6BE Ch. 11 - Times interest earned Averill Products Inc....Ch. 11 - Prob. 1E Ch. 11 - Entries for issuing bonds Thomson Co. produces and...Ch. 11 - Prob. 3E Ch. 11 - Prob. 4E Ch. 11 - Prob. 5E Ch. 11 - Entries for issuing and calling bonds; gain Mia...Ch. 11 - Prob. 7E Ch. 11 - Present value of amounts due Assume that you are...Ch. 11 - Prob. 9E Ch. 11 - Present value of an annuity On January 1, you win...Ch. 11 - Prob. 11E Ch. 11 - Prob. 12E Ch. 11 - Prob. 13E Ch. 11 - Prob. 14E Ch. 11 - Appendix 2 Amortize premium by interest method...Ch. 11 - Prob. 16E Ch. 11 - Prob. 17E Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 2PA Ch. 11 - Entries for bonds payable, including bond...Ch. 11 - Appendix 1 and Appendix 2 Bond discount, entries...Ch. 11 - Prob. 5PA Ch. 11 - Bond discount, entries for bonds payable...Ch. 11 - Prob. 2PB Ch. 11 - Entries for bonds payable, including bond...Ch. 11 - Prob. 4PB Ch. 11 - Prob. 5PB Ch. 11 - Analyze and compare Amazon.com and Wal-Mart...Ch. 11 - Analyze and compare Clorox and Procter Gamble The...Ch. 11 - Prob. 3MAD Ch. 11 - Analyze and compare Hilton and Marriott Hilton...Ch. 11 - Prob. 1TIF Ch. 11 - Prob. 3TIF Ch. 11 - Prob. 4TIF

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Similar questions

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
Whirlie Inc. issued $300,000 face value, 10% paid annually, 10-year bonds for $319,251 when the market of interest was 9%. The company uses the effective-interest method of amortization. At the end of the year, the company will record ________. A. a credit to cash for $28,733 B. a debit to interest expense for $31,267 C. a debit to Discount on Bonds Payable for $1,267 D. a debit to Premium on Bonds Payable for $1.267

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