Shaw Communications Inc. is a diversified Canadian communications company that provides cable television, Internet, digital phone, telecommunications, and satellite direct-to-home services to more than 3 million customers. On February 17, 2011, the company sold long-term notes with the following specifications:

Because the company pays semi- annual interest of $ 13,500,000, it collected from the investors in these notes an amount representing interest that accrued for 99 days, from November 9, 2010, to February 17, 2011. This amount was repaid to the investors on May 9, 2011, as part of the semi-annual payment. For interest computations, assume that the year consists of 360 days.
Required:
1. Prepare the journal entries to record the sales of the notes on February 17, 2011.
2. Prepare the journal entries to record the payments of interest and amortization of the discount on May 9 and November 9, 2011. The company uses the effective- interest method to amortize the discount.
3. Compute the interest expense that accrued from November 9, 2011, to December 31, 2011, the end of Shaw€™s fiscal year, and prepare the adjusting journal entries on December 31, 2011, to record interest expense and amortization of the discount on the notes.
4. Show the amounts that should be reported on Shaw€™s financial statements for 2011.
5. Compute the total amount of interest expense over the life of the notes.
6. After looking at the issue price, a student asked why the management of Shaw Communications did not simply sell the notes at 100 percent of the principal amount instead of selling them at a discount. How would you respond to this question?

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Principal amount Maturity date Issue price Coupon rate Effective interest rate Interest payment dates $400 million November 9, 2039 97379% of principal amount 675° 6.961% May 9 and November 9