On July 1, 2015, Swift Current Industries Ltd. issued $16,000,000 of 10-year, 6% bonds at an effective interest rate of 7%, receiving cash of $14,863,007.74. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
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 December 31, 2015, and the amortization of the bond discount, using the effective interest method.
b. The interest payment on June 30, 2016, and the amortization of the bond discount, using the effective interest method.
c. The interest payment on December 31, 2016, and the amortization of the bond discount, using the effective interest method.
3. Determine the total interest expense for 2015.
4. Show the reporting of the bonds on the statement of financial position at December 31, 2015, and at December 31, 2016, rounding numbers to the nearest whole dollar.