Question

On the first day of its fiscal year, Chin Company issued $15,400,000 of five-year, 6% 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 $14,150,860.

Entries for Issuing Bonds and Amortizing Premium by Straight-Line Method Smiley Corporation wholesales repair products to equipment manufacturers on Apr 1 Year I S $3,664,240. Interest is payable semiannually on April 1 and October 1. ey issue $3.500,000 of year, 9% bonds at a market e e tive n e estate i 6 e e ing a a. Journalize the entry to record the issuance of bonds on April 1, Year 1. If an amount box does not require an entry, leave it blank b. Journalize the entry to record the first interest payment on October 1, Year 1, and amortization of bond premium for six months, using the straight-line method. (Round to the nearest dollar) If an amount box does not require an entry, leave it blank. c. Why was the company able to issue the bonds for $3,664,240 rather than for the face amount of $3,500,000? The market rate of interest is the contract rate of interest.