On the First Day of the Fiscal Year, a Company

question 4

Essay

On the first day of the fiscal year, a company issues a $1,000,000, 7%, 5 year bond that pays semi-annual interest of $35,000 ($1,000,000 × 7% × 1/2), receiving cash of $884,171. Journalize the first interest payment and the amortization of the related bond discount using the straight-line method. Round answer to the nearest dollar.

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Definitions:

Impeller

The driving member of a torque converter torus; the impeller is mechanically connected to the engine crankshaft and should rotate at the same speed.

Lock-up Clutch

A mechanism used in automatic transmissions that locks the engine directly to the transmission's output, improving fuel efficiency and performance.