10_PresentValExercise2 (1).xlsx (11.1 KB) Page < 2 of 2 D) Second Chances also decided to issue some long term bonds payable. $100,000 of debt were issued with a contractual rate of 12% for 5 years. The current market rate is 10%. The bonds were issued on 1/1/2011 and pay interest semi-annually. Second Chances has determined that the effective interest rate method of amortization should be used. 1. What is the journal entry for the initial bond issuance? 2. What is the journal entry for the first interest payment? 3. What is the journal entry for the second interest payment? 4. What is the carrying value at the end of the first year? 5. What is the journal entry for the last interest payment? 6. What is the journal entry for the retirement of the bonds? 7. What is the difference between the total cash paid out and the interest expense? What does this difference represent?
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The journal entry for the initial bond issuance would be: Debit: Cash (for the amount received, $100,000) Credit: Bonds Payable (for the face value of the bonds, $100,000) Show more…
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