Bond Discount, Entries for Bonds Payable Transactions

On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $6,300,000 of 4-year, 9% bonds at a market (effective) interest rate of 11%, receiving cash of $5,900,921. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. For a compound transaction, if an amount box does not require an entry, leave it blank.

		fill in the blank b09f820cc04e07f_2	fill in the blank b09f820cc04e07f_3
		fill in the blank b09f820cc04e07f_5	fill in the blank b09f820cc04e07f_6
		fill in the blank b09f820cc04e07f_8	fill in the blank b09f820cc04e07f_9

2. Journalize the entries to record the following: For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answer to the nearest dollar.

a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method.

		fill in the blank e80df202cff2028_2	fill in the blank e80df202cff2028_3
		fill in the blank e80df202cff2028_5	fill in the blank e80df202cff2028_6
		fill in the blank e80df202cff2028_8	fill in the blank e80df202cff2028_9

b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method.

		fill in the blank fac0c809b07204f_2	fill in the blank fac0c809b07204f_3
		fill in the blank fac0c809b07204f_5	fill in the blank fac0c809b07204f_6
		fill in the blank fac0c809b07204f_8	fill in the blank fac0c809b07204f_9

3. Determine the total interest expense for Year 1. Round to the nearest dollar. $fill in the blank 48b62dffdfd2029_1

4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest?

5. Compute the price of $5,900,921 received for the bonds by using Table 1, Table 2, Table 3 and Table 4. (Round to the nearest dollar.) Your total may vary slightly from the price given due to rounding differences.

Present value of the face amount	$fill in the blank 48b62dffdfd2029_3
Present value of the semiannual interest payments	fill in the blank 48b62dffdfd2029_4
Price received for the bonds	$fill in the blank 48b62dffdfd2029_5