rnalize the entry to record the amount of rnalize the entries to record the following The first semiannual interest payment or straight-line method (Round to the near
rnalize the entry to record the amount of rnalize the entries to record the following The first semiannual interest payment or straight-line method (Round to the near
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![On July 1, 20Y1, Danzer Industries Inc. issued $48,800,000 of 10-year, 9% bonds at a market (effective) interest rate of 11%, receiving
cash of $42,968,258. 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 $42,968,258 received for the bonds by using the present value tables. (Round to the nearest dollar.)
*Refer to the Chart of Accounts for exact wording of account titles.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fcbed4081-e845-4838-b386-726b7eb7e26e%2F9c09704f-929b-4dc1-a627-c83aa65bc4ad%2Fx1fbzvm_processed.png&w=3840&q=75)
Transcribed Image Text:On July 1, 20Y1, Danzer Industries Inc. issued $48,800,000 of 10-year, 9% bonds at a market (effective) interest rate of 11%, receiving
cash of $42,968,258. 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 $42,968,258 received for the bonds by using the present value tables. (Round to the nearest dollar.)
*Refer to the Chart of Accounts for exact wording of account titles.
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