journalizing On July 1; Year 1, Danzer Industries Inc. issued $43,200,000 of 10-
ID: 2577161 • Letter: J
Question
journalizing
On July 1; Year 1, Danzer Industries Inc. issued $43,200,000 of 10-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $48,50 AL 8,184. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. AL Required 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.- 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 straight-line method. (Round to the nearest dollar.) b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. Round to the nearest dollar.) 3. Determine the total interest expense for Year 1. 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 $40,508, 184 recei ved 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. Check My Work Previous Next 5:28 P 0 N archExplanation / Answer
Face value 43,200,000 issue price of bonds 40,508,184 discount on bonds issue 2,691,816 Amortization of bonds discount (2,691,816/20)= 134591 1) Date Accounting title & Explanations Debit Credit 1-Jul cash 40,508,184 discount on bonds payable 2,691,816 Bonds payable 43,200,000 2a) 31-Dec interest expense 2078591 discount on bonds payable 134591 cash (43,200,000*9%*1/2) 1944000 30-Jun interest expense 2078591 discount on bonds payable 134591 cash (43,200,000*9%*1/2) 1944000 3) total interest expense for year 1 4157182 4) yes 5) where n = 5% and t = 20 years present value of the face amount (43,200,000*.37689) 16281648 PV of the semi annual interst paym(1,944,000*12.46221) 24226536 bonds issue price 40508184
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.