Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $23,000,000 of 5-year, 9% bonds to finance ts operations. Interest is payable semiannually. The bonds were issued at a market (effective) Interest rate of 11%, resulting in tert receiving cash of $21,266,337. The company uses the interest method a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest doilar. an amount box does not require an entry, leave blank. Cash 21.34.137 Discount on Bonds Payable Bonds Payable 20.000.000 Check on Bonds Payable * www recorded at face value. Any difference in koue price is reflected in a premium or actunt account 2. First semiannunt interest payment, including armortization of Oncount. Hound to the nearest dotat amoune box does not mee entry, travel blank Interest Expense Discount on Bonds Payable Cash 55 Second semiannual interest payment, including amortization of discount. Round to the nearest of an arrunt box does not require an entry, tuve et bare My Wor esco 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Foto Check My Wor As the discount or premium is amortired, the carrying amount of the band changes. As a resut, interest expense also changes each period, b. Compute the amount of the bond interest expense for the first year. Hound to the nearest dottor Annual interest paid Discount amortized Interest expense for first year Pueber Ghet wy w To find the interest expense either add any discount amortized or subtract any premium amortized to cash paid to the bonhecer c. Explain why the company was able to issue the bonds for only $21,266,337 rather than for the face amount of $23,000,000 The bonds sell for less than the face amount because the market rate of interestis the contract rate of interest. Investors amount for bonds that pay a lower contract rate of interest than the rite they could earn on similar bonds (market rate) willing to pay the fullface Feedback Chat work Bands will be issued for either a higher or one amount than the face value when the market and contract rates of interest are different