# Entries for issuing bonds and amortizing premium by straight-line method Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Smiley Corporation issued $20,000,000 of five-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of$20,811,010. Interest is payable semiannually on April 1 and October 1. Journalize the entries to record the following: a. Issuance of bonds on April 1. b. 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. c. Explain why the company was able to issue the bonds for $20,811,010 rather than for the face amount of$20,000,000.

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

### Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

#### Solutions

Chapter
Section
Chapter 14, Problem 14.7EX
Textbook Problem

## Entries for issuing bonds and amortizing premium by straight-line methodSmiley Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Smiley Corporation issued $20,000,000 of five-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of$20,811,010. Interest is payable semiannually on April 1 and October 1. Journalize the entries to record the following:a. Issuance of bonds on April 1.b. 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.c. Explain why the company was able to issue the bonds for $20,811,010 rather than for the face amount of$20,000,000.

Expert Solution

(a)

To determine

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.

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