Question

Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% 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 8%, resulting in Chin receiving cash of $9,594,415. a. Journaliste 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 9,594415 Discount on Bonds Payable , Bonds Payable 10.000.000 Interest Expense Discount on Bonds Payable Cash

Answer 1

Book1 - Excel A Srinivas 25 AutoSave DHE File Home Insert Page Layout Formulas Data Review View Help Share C23 X B C D E KL DATE DEBIT PERIODS FACE VALUE STATED RATE MARKET RATE 10000000 7X 89 JOURNAL ENTRIES PARTICULARS Cash A/C......Dr Discount on bonds payable A/C...Dr TO Bonds payable A/C (Being bonds issued for discount) CREDIT 9594415 405585 10000000 STRAIGHT LINE METHOD-DISCOUNT Interest expense Discount amortization Book value 390558 Cash Interest expense A/C...Dr TO discount on bonds payable A/C TO cashA/C (Being interest expense recognised) 350000 40558 390558.5 350000 350000 40558.5 9594415 40558.5 9634974 390558.5 390558 Interest expense A/C...Dr TO discount on bonds payable A/C TO cashA/C (Being interest expense recognised) 350000 40558 NOTE 1) Total discount on bonds is amortised over 10 periods