On the first day of its fiscal year, Jones Company issued $6,000,000 of five-year, 8% bonds to finance its operations of producing and selling home electronics equipment. Interest is payable semiannually. The bonds were issued at an effective interest rate of 11%. Refer to the tables in Appendix A for present value factors.
a. Record the entries for the following:
1. Sale of the bonds.
2. First semiannual interest payment. (Amortization of discount is to be recorded annually.)
3. Second semiannual interest payment.
4. Amortization of discount at the end of the first year, using the straight-line method. Round to the nearest dollar.
b. Determine the amount of the bond interest expense for the first year.