Bond Discount, Entries for Bonds Payable Transactions On July 1, 2011, Livingston Corporation, a wholesaler of manufacturing equipment, issued $6,300,000 of 7-year, 8% bonds at a market (effective) interest rate of 10%, receiving cash of $5,676,398. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries, if an amount box does not require an entry, leave it blank. 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 20Y1. Cash 5,676,398 Discount on Bonds Payable 623,602 Bonds Payable 6,300,000 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. 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond discount, using the straight-line method. Round to the nearest dollar. Interest Expense Discount on Bonds Payable a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond discount, using the straight-line method. Round to the nearest dollar. Interest Expense Discount on Bonds Payable Cash Feedback Check My Work The straight-line method of amortization provides equal amounts of amortization over the life of the bond. b. The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the straight-line method. Round to the nearest dollar. Interest Expense Discount on Bonds Payable Cash Feedback 3. Determine the total interest expense for 20Y1. 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 $5,676,398 received for the bonds by using the present value tables in Appendix A. Round your PV values to 5 decimal places and the final answers 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 Check My Work Calculate the present value of the face amount of the bonds by using the the Present Value of $1 table. Calculate the present value of the semiannual interest payments by using the Present Value of an Annuity of $1 table. Feedback Check My Work