Instructions On January 1, the first day of its fiscal year, Pretender Company i
ID: 2500176 • Letter: I
Question
Instructions On January 1, the first day of its fiscal year, Pretender Company issued $18,400,000 of five-year, 8% 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 9%, resulting in Pretender Company receiving cash of $17,672,074. Required: A. Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of account titles): 1. Issuance of the bonds. 2. First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.) 3. Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
Explanation / Answer
Date Account Title and Expalantion Debit($) Credit($) 1 Cash 17672074 Discount on Bonds Payable 727926 Bonds payable 18400000 To record the issue of the bonds 2 Bond Interest expense 736000 Cash 736000 (18400000*0.08/2) 3 Bond Interest expense 795243.33 Discount on Bonds Payable 59243.33 Cash 736000