On the first day of its fiscal year, Ebert Company issued $12,500,000 of 10-year, 7% bonds...

 

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On the first day of its fiscal year, Ebert Company issued $12,500,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were market (effective) interest rate of 9%, resulting in Ebert receiving cash of $10,873,974. The company uses the interest method. Required: a. Journalize the entries to record the following transactions. 1. Sale of the bonds on January 1. 2. First semiannual interest payment on June 30, including amortization of discount. 3. Second semiannual interest payment on December 31, including amortization of discount. b. Compute the amount of the bond interest expense for the first year. c. Explain why the company was able to issue the bonds for only $10,873,974 rather than for the face amount of $12,500,000. On the first day of its fiscal year, Ebert Company issued $12,500,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were market (effective) interest rate of 9%, resulting in Ebert receiving cash of $10,873,974. The company uses the interest method. Required: a. Journalize the entries to record the following transactions. 1. Sale of the bonds on January 1. 2. First semiannual interest payment on June 30, including amortization of discount. 3. Second semiannual interest payment on December 31, including amortization of discount. b. Compute the amount of the bond interest expense for the first year. c. Explain why the company was able to issue the bonds for only $10,873,974 rather than for the face amount of $12,500,000.

Answer rating: 100% (QA)

Based on the provided information we can proceed to journalize the entries and perform the necessary calculations a Journalize the entries to record the following transactions 1 Sale of the bonds on J... View the full answer