mccool corporation wholesales repair products to equipment manufacturers on april 1 458381

Entries for issuing bonds and amortizing premium by straight line method

McCool Corporation wholesales repair products to equipment manufacturers. On April 1, 2010, McCool Corporation issued $30,000,000 of five year, 10% bonds at a market (effective) interest rate of 8%, receiving cash of $32,446,500. Interest is payable semiannually on April 1 and October 1. Journalize the entries to record the following:

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a. Sale of bonds on April 1, 2012.

b. First interest payment on October 1, 2012, and amortization of bond premium for six months, using the straight line method. (Round to the nearest dollar).

c. Explain why the company was able to issue the bonds for $32,446,500 rather than for the face amount of $30,000,000.

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