On July 1, 20Y1, Danzer Industries Inc. issued $60,000,000 of 10-year, 8% bonds at a market (effective) interest rate of 10%, receiving cash of $52,522,704. 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. b. The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the straight-line method. 3. Determine the total interest expense for 20Y1.
On July 1, 20Y1, Danzer Industries Inc. issued $60,000,000 of 10-year, 8% bonds at a market (effective) interest rate of 10%, receiving cash of $52,522,704. 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. b. The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the straight-line method. 3. Determine the total interest expense for 20Y1.
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter14: Long-term Liabilities: Bonds And Notes
Section: Chapter Questions
Problem 3PB
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On July 1, 20Y1, Danzer Industries Inc. issued $60,000,000 of 10-year, 8% bonds at a market (effective) interest rate of 10%, receiving cash of $52,522,704. 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. | |||||
2. | Journalize the entries to record the following:
|
||||
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 $52,522,704 received for the bonds by using the present value tables. |
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