akeAssignmentM invoke as aindo Entries for Issuing Bonds and

akeAssignmentM ?invoke as ain.do Entries for Issuing Bonds and Amortizing Discount by Straight-Line Methocd on the first day of its fiscal year, Chin Company issued $10,000,000 of five-year, 7% bonds to fin improvement products. Interest is payable semiannually of $9,594,415. ance its operations of produdng and selling home The bonds were issued at a market (effective) interest rate of 8% resulting in Chin rece ing cash a. Journalize 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.) For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. 1. Cash onds Payable y 2. ^

Solution

Account titles and explanation Debit Credit 1 Cash 9594415 Discount on bonds payable 405585 Bonds payable 10000000 (Issuance of bonds) 2 Interest expense 390558.5 Discount on bonds payable 40558.5 Cash (10000000*7%*1/2) 350000 (First semi-annual interest payment) 3 Interest expense 390558.5 Discount on bonds payable 40558.5 Cash (10000000*7%*1/2) 350000 (Second semi-annual interest payment) Note: Life of the bond=5 years\' Number of semi-annual interest payment=5*2=10 semi-annual payments Discount to be amortized=405585/10=40558.5