Question

Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Daan Corporation wholesales repair products to equipment manufacturers. On April 1, 2016, Daan Corporation issued $1,500,000 of 5-year 9 bonds at a mat Interest rate of 7%, receiving cash of $1,624,747. Interest is payable semiannually on April 1 and October 1 effective) a. Journalize the entry to record the issuance of bonds on April 1, 2016. For a compound transaction an amount box does not recreantry wave bank b. Journalize the entry to record the first interest payment on October 1, 2016, 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) For a compound transaction, an amount box does not mean entry leave it blank c. Why was the company able to issue the bonds for $1,624,747 rather than for the face amount of $1,500,000 The market rate of interest is the contract rate of interest

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer Parta) $ 16,24,747 Cash Premium on Bond Payable (1624727-1500000) Bond Payable $ $ 1,24,747 15,00,000 - Part b) Interest expense (67500-12475) Premium on bond payable (124747/10) 1 Cash (1500000*9%/2) $ $ 55,025 12,475 $ 67,500 2 - Partc) 5 The market rate of interest is lower than the contract rate of interest 3 For any help please comment in the comment box Thank You