Bond Discount, Entries for Bonds Payable Transactions On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $8,400,000 of 7-year, 10% bonds at a market (effective) interest rate of 12%, receiving cash of $7,619,219. 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. Cash 7,619,219 0 Discount on Bonds Payable 780,781 0 Bonds Payable 8,400,000 Feedback Check My Work Bonds Payable is always recorded at face value. Any difference in issue price reflected in a premium or discount account. 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. Interest Expense 0 Discount on Bonds Payable Cash Feedback Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond. b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. Interest Expense 0 Discount on Bonds Payable 0 Cash 0 Feedback Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. The straight-line method of amortization provides equal amounts of amortization over the life of the bond. 3. Determine the total interest expense for Year 1. Round to the nearest dollar. $ 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? Yes 5. Compute the price of $7,619,219 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 $ Present value of the semiannual interest payments Price received for the bonds Feedback