Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Srriley issued $18,400,000...
70.2K
Verified Solution
Link Copied!
Question
Accounting
Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Srriley issued $18,400,000 of five-yeac, 12% bonds at a market (effective) interest tate of 10%, receeving cash of $19,820,734. Interest is payabie semiannualy on April 1 and October 1. Required: a. Journasize the entries to recond the following. Fefer to the Chavt of Accotants for exact wording of account tites. 1. Bssuance of bonds on April 1, 20Y1. 2. First interest payment on Oetober 1, 20Y1, and amortization of bond premium for six months. using the straighe-line method. (Round to the nearest dollave) b. Explain why the company was able to issue the bonds for $19.620,734 tather than for the hace amount or $16,400,000 Journalize the entries. Refer to the Chant of Accounts for exact wording of account tiles. Aound to the nearest dollar. b. Explain why the company was abie to issue the bands for $19,820,734 rather than for the face amount of $18,400,000. The bonds seli for more than their face amount because the market rate of interest is the contract rate of interest, Ifwestors bonds that pay a higher rate of interest (contract rate) than the rate they could earn on similar bonds (market rate)
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
