Amortize Discount by Interest Method

On the first day of its fiscal year, Ebert Company issued $20,000,000 of 5-year, 10% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 11%, resulting in Ebert Company receiving cash of $19,246,230. The company uses the interest method.

a. Journalize the entries to record the following:

1. Sale of the bonds. Round amounts to the nearest dollar. If an amount box does not require an entry, leave it blank.

	Cash	fill in the blank bb5d330c406507f_2	fill in the blank bb5d330c406507f_3
	Discount on Bonds Payable	fill in the blank bb5d330c406507f_5	fill in the blank bb5d330c406507f_6
	Bonds Payable	fill in the blank bb5d330c406507f_8	fill in the blank bb5d330c406507f_9

2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank.

	Interest Expense	fill in the blank e7892a06afdffd8_2	fill in the blank e7892a06afdffd8_3
	Discount on Bonds Payable	fill in the blank e7892a06afdffd8_5	fill in the blank e7892a06afdffd8_6
	Cash	fill in the blank e7892a06afdffd8_8	fill in the blank e7892a06afdffd8_9

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.

	Interest Expense	fill in the blank 7a3ab5fa9fddf85_2	fill in the blank 7a3ab5fa9fddf85_3
	Discount on Bonds Payable	fill in the blank 7a3ab5fa9fddf85_5	fill in the blank 7a3ab5fa9fddf85_6
	Cash	fill in the blank 7a3ab5fa9fddf85_8	fill in the blank 7a3ab5fa9fddf85_9

b. Compute the amount of the bond interest expense for the first year. Round amounts to the nearest dollar.

Annual interest paid	$fill in the blank 69c52e062012ffe_1
Discount amortized	fill in the blank 69c52e062012ffe_2
Interest expense for first year	$fill in the blank 69c52e062012ffe_3