14-07 14-3Entries for Issuing Bonds and Amortizing Premium byStraight-Line MethodDaan Corporation wholesales repair products...14-07...

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Accounting

14-07 14-3Entries for Issuing Bonds and Amortizing Premium byStraight-Line Method
Daan Corporation wholesales repair products to equipmentmanufacturers. On April 1, 2016, Daan Corporation issued $1,400,000of 8-year, 7% bonds at a market (effective) interest rate of 6%,receiving cash of $1,487,929. Interest is payable semiannually onApril 1 and October 1.
a. Journalize the entry to record the issuanceof bonds on April 1, 2016. For a compound transaction, if an amountbox does not require an entry, leave it blank.
b. Journalize the entry to record the firstinterest payment on October 1, 2016, and amortization of bondpremium for six months, using the straight-line method. The bondpremium amortization is combined with the semiannual interestpayment. (Round to the nearest dollar.) For a compound transaction,if an amount box does not require an entry, leave it blank.
c. Why was the company able issue the bonds for$1,487,929 rather than for the face amount of $1,400,000?
The market rate of interest is (GREATER THAN/LESSTHAN) the contract rate of interest

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a journal entry for issue of bond date particulars debit credit 01042016 cash account dr 1487929 to bond payable 1400000 to premium on bond payable 87929 Being issue of bonds See Answer

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In: Accounting14-07 14-3Entries for Issuing Bonds and Amortizing Premium byStraight-Line MethodDaan Corporation wholesales repair products...14-07 14-3Entries for Issuing Bonds and Amortizing Premium byStraight-Line MethodDaan Corporation wholesales repair products to equipmentmanufacturers. On April 1, 2016, Daan Corporation issued $1,400,000of 8-year, 7% bonds at a market (effective) interest rate of 6%,receiving cash of $1,487,929. Interest is payable semiannually onApril 1 and October 1.a. Journalize the entry to record the issuanceof bonds on April 1, 2016. For a compound transaction, if an amountbox does not require an entry, leave it blank.b. Journalize the entry to record the firstinterest payment on October 1, 2016, and amortization of bondpremium for six months, using the straight-line method. The bondpremium amortization is combined with the semiannual interestpayment. (Round to the nearest dollar.) For a compound transaction,if an amount box does not require an entry, leave it blank.c. Why was the company able issue the bonds for$1,487,929 rather than for the face amount of $1,400,000?The market rate of interest is (GREATER THAN/LESSTHAN) the contract rate of interest