Answer Happy

Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method On the first day of its fiscal year, Jacinto Company issued $13,000,000 of five-year, 9% 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 Jacinto Company receiving cash of $12,020,104. a. Journalize the entries to record the following: 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. 3. Second semiannual interest payment. The bond discount amortization is combined with the semiannual interest payment. If an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar. 1. Cash 12020104 Discount on Bonds Payable Bonds Payable 2. Interest Expense Discount on Bonds Payable Cash 3. Interest Expense Discount on Bonds Payable Cash b. Determine the amount of the bond interest expense for the first year. Round your answer to the nearest dollar. $ c. Why was the company able to issue the bonds for only $12,020,104 rather than for the face amount of $13,000,000? The market rate of interest is the contract rate of interest. 2