On September 1, 2015, Grand Forks Ltd. issued $16,000,000 of five-year, 6% bonds at an effective interest rate of 5%, receiving cash of $16,700,189 plus accrued interest. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year-end of the company is March 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 December 31, 2015, and the amortization of the bond premium, using the straight-line method.
b. The adjusting entry for interest expense at the March 31, 2016, year-end.
c. The interest payment on June 30, 2016, and the amortization of the bond premium.
3. Prepare the long-term liabilities section of the balance sheet for Grand Forks Ltd. as at March 31, 2016, rounding to the nearest whole dollar.