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9 September, 11:29

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

Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, Year 1, Smiley issued $20,000,000 of five-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $20,811,010. Interest is payable semiannually on April 1 and October 1.

a. Journalize the entry to record the issuance of bonds on April 1, Year 1. For a compound transaction, if an amount box does not require an entry, leave it blank.

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  1. 9 September, 14:10
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    Smiley issued $20,000,000 of five-year, 9% bonds at a market (effective) interest rate of 8%, receiving cash of $20,811,010.

    The journal entry is as follows:

    On April 1,

    Cash A/c Dr. $20,811,010

    To Bonds payable A/c $20,000,000

    To Premium on bonds payable $811,010

    (To record the issuance of bonds)
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