Bond Discount, Entries for Bonds Payable Transactions

On July 1, 20Y1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $4,300,000 of 10-year, 9% bonds at a market (effective) interest rate of 11%, receiving cash of $3,786,138. 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.

		fill in the blank 937fd2043fecfa6_2	fill in the blank 937fd2043fecfa6_3
		fill in the blank 937fd2043fecfa6_5	fill in the blank 937fd2043fecfa6_6
		fill in the blank 937fd2043fecfa6_8	fill in the blank 937fd2043fecfa6_9

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.

		fill in the blank 7cd136f27fa5060_2	fill in the blank 7cd136f27fa5060_3
		fill in the blank 7cd136f27fa5060_5	fill in the blank 7cd136f27fa5060_6
		fill in the blank 7cd136f27fa5060_8	fill in the blank 7cd136f27fa5060_9

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.

		fill in the blank ffb02f01c002ffa_2	fill in the blank ffb02f01c002ffa_3
		fill in the blank ffb02f01c002ffa_5	fill in the blank ffb02f01c002ffa_6
		fill in the blank ffb02f01c002ffa_8	fill in the blank ffb02f01c002ffa_9

3. Determine the total interest expense for 20Y1. Round to the nearest dollar. $fill in the blank 05b7d2fb0030fac_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 $3,786,138 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	$fill in the blank 05b7d2fb0030fac_3
Present value of the semiannual interest payments	fill in the blank 05b7d2fb0030fac_4
Price received for the bonds	$fill in the blank 05b7d2fb0030fac_5