Question

On the first day of its fiscal year, Chin Company issued $28,200,000 of five-year, 10% 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 11%, resulting in Chin receiving cash of $27,137,184. a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 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. Round your answers to the nearest dollar. 1. Cash 27,137,184 Discount on Bonds Payable Bonds Payable 28,200,000 2. Interest Expense Discount on Bonds Payable Cash 3. Interest Expense Discount on Bonds Payable Cash On the first day of its fiscal year, Chin Company issued $28,200,000 of five-year, 10% 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 11%, resulting in Chin receiving cash of $27,137,184. a. Journalize the entries to record the following: Issuance of the bonds. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 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. Round your answers to the nearest dollar. 1. Cash 27,137,184 Discount on Bonds Payable Bonds Payable 28,200,000 2. Interest Expense Discount on Bonds Payable Cash 3. Interest Expense Discount on Bonds Payable Cash

Answer 1

Solution:

Journal Entries - Chin Company
Event	Particulars	Debit	Credit
1	Cash Dr	$27,137,184.00
	Discount on bond payable Dr	$1,062,816.00
	To Bond Payable		$28,200,000.00
	(To record issue of bond)
2	Interest expense Dr ($27,137,184 * 11%*6/12)	$1,492,545.00
	To Cash ($28,200,000*10%*6/12)		$1,410,000.00
	To Discount on bond payable		$82,545.00
	(To record semiannual interest payment and discount amortization)
3	Interest expense Dr [($27,137,184+$82,545) * 11%*6/12)	$1,497,085.00
	To Cash ($28,200,000*10%*6/12)		$1,410,000.00
	To Discount on bond payable		$87,085.00
	(To record semiannual interest payment and discount amortization)