On July 1, Year 1, Danzer Industries Inc. issued $25,000,000 of 20-year, 11% bon

Question

On July 1, Year 1, Danzer Industries Inc. issued $25,000,000 of 20-year, 11% bonds at a market (effective) interest rate of 14%, receiving cash of $20,001,500. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

For all journal entries: If an amount box does not require an entry, leave it blank.

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, Year 1, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.)

b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.)

3. Determine the total interest expense for Year 1.
$

Year 1 July 1

Explanation / Answer

Answer 1

Answer 2 (a)

Asnwer 2(b)

Answer 3

Total Interest expense for Year 1 = $1,400,105

01-Jul Cash Dr          2,00,01,500 Discount on Bond Dr              49,98,500 Bonds Payable Cr          2,50,00,000

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