On July 1, 20Y1, Danzer Industries Inc. issued $50,000,000 of 10-year, 8% bonds at a market (effective) interest rate of 10%, receiving cash of $43,768,920. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.Required:1.Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1.*2.Journalize the entries to record the following:*a.The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)b.The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)3.Determine the total interest expense for 20Y1.4.Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?5.Compute the price of $43,768,920 received for the bonds by using the present value tables. (Round to the nearest dollar.)

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Asked Nov 7, 2019
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On July 1, 20Y1, Danzer Industries Inc. issued $50,000,000 of 10-year, 8% bonds at a market (effective) interest rate of 10%, receiving cash of $43,768,920. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
Required:
1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1.*
2. Journalize the entries to record the following:*
a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
b. The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
3. Determine the total interest expense for 20Y1.
4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?
5. Compute the price of $43,768,920 received for the bonds by using the present value tables. (Round to the nearest dollar.)
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  1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds.

 

Given,

              On July 1, 20Y1

              Cash = $43,768,920

              Bonds Payable = $50,000,000

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Journal Entry Credit Amount Debit Date Particulars Amount $43,768,920 $6,231,080 Cash Account Debit Discount on Bonds Payable Account Debit ($50,000,000 - $43,768,920) To Bonds Payable Account Being to record cash proceeds from the issuance of the bonds July 1,20Y1 $50,000,000

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