On April 1, 2015, GTI Industries Ltd. issued $10,000,000 of five-year, 5.5% bonds at an effective interest rate of 6%, receiving cash of $9,786,744.93. Interest on the bonds is payable semiannually on September 30 and March 31. The fiscal year-end of the company is December 31.
Instructions
1. Journalize the entry to record the amount of cash proceeds from the sale of the bonds.
2. Journalize the entries to record the following:
a. The first semiannual interest payment on September 30, 2015, and the amortization of the bond discount, using the effective interest method.
b. The adjusting entry for interest expense at the December 31, 2015, year-end.
c. The interest payment on March 31, 2016, and the amortization of the bond discount, using the effective interest method.
3. Determine the total interest expense for the fiscal year ended December 31, 2015.