Business, 29.06.2021 16:20 briannabo08

Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley issued $1,400,000 of 4-year, 7% bonds at a market (effective) interest rate of 6%, receiving cash of $1,449,138. Interest is payable semiannually on April 1 and October 1. Required:
A. Journalize the entries to record the following. Refer to the Chart of Accounts for exact wording of account titles.
1.Issuance of bonds on April 1.
2.First interest payment on October 1 and amortization of bond premium for six months, using the straight-line method. The bond premium amortization is combined with the semiannual interest payment. (Round to the nearest dollar.)
B. Explain why the company was able to issue the bonds for $20,811,010 rather than for the face amount of $20,000,000.

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Answer from: Ladyt916

A1.Apr.1

Dr Cash $1,449,138

Cr Premium on Bonds Payable $49,138

Cr Bonds Payable $1,400,000

A2. Oct. 1

Dr Interest Expense $24,431

Dr Premium on Bonds Payable $24,569

Cr Cash $49,000

B. The BONDS was paying HIGHER INTEREST RATE of 7% to the MARKET INTEREST RATE of 6%.

Explanation:

A1. Preparation of the journal entry to record Issuance of bonds on April 1Apr.1

Dr Cash $1,449,138

Cr Premium on Bonds Payable $49,138

($1,449,138-$1,400,000)

Cr Bonds Payable $1,400,000

(To record Issuance of bonds)

A2. Preparation of the journal entry to record First interest payment on October 1 and amortization of bond premium for six months, using the straight-line method.

Oct. 1

Dr Interest Expense $24,431

($49,000-$24,569)

Dr Premium on Bonds Payable $24,569

[($1,449,138-$1,400,000)4*2]

Cr Cash $49,000

( $1,400,000 x 7% x 6/12)

(To record First interest payment and amortization of bond premium )

B. Based on the information given the reason

WHY the company was able to issue the bonds for $20,811,010 RATHER THAN for the FACE AMOUNT of $20,000,000 was because the BONDS was paying HIGHER INTEREST RATE of 7% to the MARKET INTEREST RATE of 6%.

Answer from: Quest

The business cycle is the periodic but irregular up-and-down movement in economic activity, measured by fluctuations in real gross domestic product (gdp) and other macroeconomic variables. a business cycle is typically characterized by four phases—recession, recovery, growth, and decline—that repeat themselves over time. economists note, however, that complete business cycles vary in length. the duration of business cycles can be anywhere from about two to twelve years, with most cycles averaging six years in length. some business analysts use the business cycle model and terminology to study and explain fluctuations in business inventory and other individual elements of corporate operations. but the term "business cycle" is still primarily associated with larger (industry-wide, regional, national, or even international) business trends.

Answer from: Quest

hi there, i would say your answer is:

b. there is a fixed quantity of resources and technology available.

hope that : )

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Smiley Corporation wholesales repair products to equipment manufacturers. On April 1, 20Y1, Smiley i...

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