Spring Water Company Ltd. needed to raise $50 million of additional capital to finance the expansion of its bottled water facility. After consulting an investment banker, it decided to issue bonds. The bonds had a face value of $50 million and an annual interest rate of 4.5%, paid semi-annually on June 30 and December 31, and will reach maturity on December 31, 2034. The bonds were issued at 96.1 on January 1, 2025, for $48,050,000, which represented a yield of 5%.

Required 

a. Spring Water Company issued bonds with a face value of $50 million because it wanted to raise $50 million. However, it succeeded in raising only $48,050,000. Identify and explain two possible reasons why investors were not willing to pay $50 million for the bonds. 

b. Show the journal entry to record the issuance of the bonds.

c. Show the journal entries to record the first two interest payments. Ignore year-end accruals of interest. 

d. What amount will be reported on the statement of financial position at the end of the first year related to these bonds?