On January 1, the first day of its fiscal year, Chin Company issued $10,000,000 of five-year,...

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On January 1, the first day of its fiscal year, Chin Companyissued $10,000,000 of five-year, 7% bonds to finance its operationsof producing and selling home improvement products. Interest ispayable semiannually. The bonds were issued at a market (effective)interest rate of 8%, resulting in Chin Company receiving cash of$9,594,415.
Required:
A. Journalize the entries torecord the following (refer to the Chart of Accounts for exactwording of account titles):
1. Issuance of thebonds.
2. First semiannual interestpayment. The bond discount amortization, using the straight-linemethod, is combined with the semiannual interest payment. (Roundyour answer to the nearest dollar.)
3. Second semiannual interestpayment. The bond discount amortization, using the straight-linemethod, is combined with the semiannual interest payment. (Roundyour answer to the nearest dollar.)
B. Determine the amount of thebond interest expense for the first year.
C. Explain why the company wasable to issue the bonds for only $9,594,415 rather than for theface amount of $10,000,000.

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Solution A Journal Entries Chin Company Event Particulars Debit Credit 1 Cash Dr 959441500 Discount on bond payable Dr 40558500 To Bond Payable 1000000000 To record issue of See Answer

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On January 1, the first day of its fiscal year, Chin Companyissued $10,000,000 of five-year, 7% bonds to finance its operationsof producing and selling home improvement products. Interest ispayable semiannually. The bonds were issued at a market (effective)interest rate of 8%, resulting in Chin Company receiving cash of$9,594,415.Required:A.Journalize the entries torecord the following (refer to the Chart of Accounts for exactwording of account titles):1.Issuance of thebonds.2.First semiannual interestpayment. The bond discount amortization, using the straight-linemethod, is combined with the semiannual interest payment. (Roundyour answer to the nearest dollar.)3.Second semiannual interestpayment. The bond discount amortization, using the straight-linemethod, is combined with the semiannual interest payment. (Roundyour answer to the nearest dollar.)B.Determine the amount of thebond interest expense for the first year.C.Explain why the company wasable to issue the bonds for only $9,594,415 rather than for theface amount of $10,000,000.