On July 1, 2016, Merideth Industries Inc. issued $28,500,000 of 10-year, 8% bond

Question

On July 1, 2016, Merideth Industries Inc. issued $28,500,000 of 10-year, 8% bonds at a market (effective) interest rate of 9%, receiving cash of $26,646,292. 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.* 2. Journalize the entries to record the following:* a. The first semiannual interest payment on December 31, 2016, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.) b. The interest payment on June 30, 2017, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.) 3. Determine the total interest expense for 2016. *Be sure to include the year in the date for the entries. Refer to the Chart of Accounts for exact wording of account titles.

Explanation / Answer

a) Journal entry :

2) Journal entry :

3) Total interest expense = 1201742+1199083 = 2400825

Date accounts & explanation debit credit July 1 Cash 26646292 Discount on bonds payable 1853708      Bonds payable 28500000 (To record bond payable)

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