On July 1, Year 1, Danzer Industries Inc. issued $30,000,000 of 10-year, 9% bond

Question

On July 1, Year 1, Danzer Industries Inc. issued $30,000,000 of 10-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $28,130,684. 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, 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. *Refer to the Chart of Accounts for exact wording of account titles.

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

2a. Journalize the entry to record 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.)

3. Determine the total interest expense for Year 1

Explanation / Answer

Amortisation table: Date Cash Interest Discount Unamortized Carrying Interest Eexpense Amortized Discount Value of Bonds DEC31 Year-1 1350000 1406534 56534 1812782 28187218 JUNE 30 Year-2 1350000 1409361 59361 1753421 28246579 Journal Entry: Date Accounts title and expxlanations Debit $ Credit $ 1-Jul Cash Account Dr. 28130684 Discount on Bonds payable Dr. 1869316        Bonds payable 30,000,000 Dec 31 Year-1 Interest expense Dr. 1,406,534      Cash Account 1,350,000      Dis count on Bonds payable 56534 June 30 Year-2 Interest expense Dr. 1409361      Cash Account 1350000      Dis count on Bonds payable 59361 Total Interest expense for Year-1: Total Interest expense for Year-1: $1,406,534

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