Motley Corporation issued $4,000,000, five-year, 8% bonds on January 1, 2007. The bonds were issued at an effective interest rate of 11%, resulting in Motley Corporation receiving cash proceeds of $3,547,740.80. The company uses the effective interest rate method to amortize bond discounts and premiums.
a. Using the present value tables in Appendix A, journalize the entries to record the following:
1. Sale of the bonds.
2. First semiannual interest payment (amortization of discount is to be recorded semiannually using the interest method of amortization).
3. Second semiannual interest payment.
b. Compute the amount of bond interest expense for the first year. (Round to the nearest penny.)