Bond discount, entries for bonds payable transactions, interest method of amortizing bond discount On July 1, 20Y1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of $37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Instructions 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds. 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 interest method. Round to the nearest dollar. b. The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the interest method. Round to the nearest dollar. 3. Determine the total interest expense for 20Y1.

BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
BuyFind

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169

Solutions

Chapter
Section
Chapter 11, Problem 11.4APR
Textbook Problem

Bond discount, entries for bonds payable transactions, interest method of amortizing bond discount

On July 1, 20Y1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of $37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Instructions

1.    Journalize the entry to record the amount of cash proceeds from the issuance of the bonds.

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 interest method. Round to the nearest dollar.

    b.    The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the interest method. Round to the nearest dollar.

3.    Determine the total interest expense for 20Y1.

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Chapter 11 Solutions

Corporate Financial Accounting
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