On the first day of its fiscal year, Monarch Company issued $8,000,000 of five-year, 8% bonds to finance its operations of producing and selling home electronics equipment. Interest is payable semiannually. The bonds were issued at an effective interest rate of 11%, resulting in Monarch Company receiving cash of $7,095,482.
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 annually.)
3. Second semiannual interest payment.
4. Amortization of discount at the end of the first year, using the interest method. (Round to the nearest dollar.)
b. Compute the amount of the bond interest expense for the first year.