Bond Discount, Entries for Bonds Payable Transactions

On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $6,900,000 of 8-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of $6,539,056. 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. If an amount box does not require an entry, leave it blank.

		fill in the blank 0181730b0ffafbb_2	fill in the blank 0181730b0ffafbb_3
		fill in the blank 0181730b0ffafbb_5	fill in the blank 0181730b0ffafbb_6
		fill in the blank 0181730b0ffafbb_8	fill in the blank 0181730b0ffafbb_9

2. Journalize the entries to record the following: 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 b21f70f9401f00a_2	fill in the blank b21f70f9401f00a_3
		fill in the blank b21f70f9401f00a_5	fill in the blank b21f70f9401f00a_6
		fill in the blank b21f70f9401f00a_8	fill in the blank b21f70f9401f00a_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 b8f8dffdbff9055_2	fill in the blank b8f8dffdbff9055_3
		fill in the blank b8f8dffdbff9055_5	fill in the blank b8f8dffdbff9055_6
		fill in the blank b8f8dffdbff9055_8	fill in the blank b8f8dffdbff9055_9

3. Determine the total interest expense for Year 1. Round to the nearest dollar. $fill in the blank ce94fe053f91f88_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 $6,539,056 received for the bonds by using the Present value at compound interest, and Present value of an annuity. (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 ce94fe053f91f88_3
Present value of the semiannual interest payments	fill in the blank ce94fe053f91f88_4
Price received for the bonds	$fill in the blank ce94fe053f91f88_5