On July $1,20$Y$1,$ Danzer Industries Inc. issued $$26,600,000$ of $10-$year, $10\%$ bonds at a market $($effective$)$ interest rate of $11\%,$ receiving cash of $$25,010,623.$ 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 on July $1,20$Y$1\mathrm{.}2.$Journalize the entries to record the following:

a$.$The first semiannual interest payment on December $31,20$Y$1,$ and the amortization of the bond discount, using the straight$-$line method.b$.$The interest payment on June $30,20$Y$2,$ and the amortization of the bond discount, using the straight$-$line method.

$3.$Determine the total interest expense for $20$Y$1\mathrm{.}4.$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 $$25,010,623$ received for the bonds by using the present value tables.

X

General Journal

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$1.$ Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July $1,20$Y$1.$

$2$a$.$ Journalize the entry to record the first semiannual interest payment on December $31,20$Y$1,$ and the amortization of the bond discount, using the straight$-$line method.

General Journal Instructions

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PAGE $10$

JOURNAL

ACCOUNTING EQUATION

Score: $73/75$

DATEDESCRIPTIONPOST. REF.DEBITCREDITASSETSLIABILITIESEQUITY

$1$

$$

$$

$$

$$

$2$

$$

$$

$3$

$$

$$

$$

$4$

$$

$$

$$

$$

$5$

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$$

$6$

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Points:

$13\mathrm{.}63/14$

$2$b$.$ Journalize the entry to record the interest payment on June $30,20$Y$2,$ and the amortization of the bond discount, using the straight$-$line method.

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PAGE $10$

JOURNAL

ACCOUNTING EQUATION

Score: $37/37$

DATEDESCRIPTIONPOST. REF.DEBITCREDITASSETSLIABILITIESEQUITY

$1$

$$

$$

$$

$$

$2$

$$

$$

$$

$3$

$$

$$

$$

Points:

$7/7$

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Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account.

The straight$-$line method of amortization provides equal amounts of amortization over the life of the bond.