On January 1, the first day of its fiscal year, Ebert Company issued $11,000,000 of 10-year, 10% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert Company receiving cash of $9,738,256. The company uses the interest method.
Required:
A. Journalize the entries to record the following transactions. Refer to the Chart of Accounts for the exact wording of account titles.
A1. Sale of the bonds.
A2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar.
A3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar.
B. Compute the amount of the bond interest expense for the first year.
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On January 1, the first day of its fiscal year, Ebert Company issued $11,000,000 of 10-year, 10% bon...
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