On July $1,20$Y$1,$ Danzer Industries Inc. issued $$40,000,000$ of $10-$year, $7\%$ bonds at a market $($effective$)$ interest rate of $8\%,$ receiving cash of $$37,282,062.$ 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.

$2.$ 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 interest method.

b$.$ The interest payment on June $30,20$Y$2,$ and the amortization of the bond discount, using the interest method.

$3.$ Determine the total interest expense for $20$Y$1.2$b$.$ The interest payment on June $30,$ Year $2,$ and the amortization of the bond discount, using the straight$-$line method.

Answer:

Date

Account titles and explanation

Debit

Credit

June $30,20$Y$2$

Intererst Expense

$1,535,897$

Discount on Bonds Payable

$135,897$

Cash

$1,400,000$

$($To record interest payment and amortization of discount $)$ entry $2$b is wrong