Entries for Issuing Bonds and Amortizing Discount by Straight-Line Method

On the first day of its fiscal year, Chin Company issued $12,000,000 of five-year, 11% 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 12%, resulting in Chin Company receiving cash of $11,558,339.

a. Journalize the entries to record the following:

1. Issuance of the bonds.
2. First semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
3. Second semiannual interest payment. The bond discount amortization, using the straight-line method, is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)

For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answers to the nearest dollar.

1.	Cash	fill in the blank cbb184fbdfc4047_2	fill in the blank cbb184fbdfc4047_3
	Discount on Bonds Payable	fill in the blank cbb184fbdfc4047_5	fill in the blank cbb184fbdfc4047_6
	Bonds Payable	fill in the blank cbb184fbdfc4047_8	fill in the blank cbb184fbdfc4047_9
2.	Interest Expense	fill in the blank cbb184fbdfc4047_11	fill in the blank cbb184fbdfc4047_12
	Discount on Bonds Payable	fill in the blank cbb184fbdfc4047_14	fill in the blank cbb184fbdfc4047_15
	Cash	fill in the blank cbb184fbdfc4047_17	fill in the blank cbb184fbdfc4047_18
3.	Interest Expense	fill in the blank cbb184fbdfc4047_20	fill in the blank cbb184fbdfc4047_21
	Discount on Bonds Payable	fill in the blank cbb184fbdfc4047_23	fill in the blank cbb184fbdfc4047_24
	Cash	fill in the blank cbb184fbdfc4047_26	fill in the blank cbb184fbdfc4047_27

b. Determine the amount of the bond interest expense for the first year. $fill in the blank 76280d074075f97_1

c. Why was the company able to issue the bonds for only $11,558,339 rather than for the face amount of $12,000,000? The market rate of interest is greater than the contract rate of interest.