Campbell Inc. produces and sells outdoor equipment. On July 1, Year 1, Campbell issued $59,400,000 of 10-year, 13% bonds at a market (effective) interest rate of 11%, receiving cash of $66,498,579. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Required:

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, Year 1.

	Cash	fill in the blank effaa4fcef89fef_2	fill in the blank effaa4fcef89fef_3
	Premium on Bonds Payable	fill in the blank effaa4fcef89fef_5	fill in the blank effaa4fcef89fef_6
	Bonds Payable	fill in the blank effaa4fcef89fef_8	fill in the blank effaa4fcef89fef_9

2. Journalize the entries to record the following:

a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)

	Interest Expense	fill in the blank 009326fb206fff7_2	fill in the blank 009326fb206fff7_3
	Premium on Bonds Payable	fill in the blank 009326fb206fff7_5	fill in the blank 009326fb206fff7_6
	Cash	fill in the blank 009326fb206fff7_8	fill in the blank 009326fb206fff7_9

b. The interest payment on June 30, Year 2, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.)

	Interest Expense	fill in the blank c4688a025ffefa8_2	fill in the blank c4688a025ffefa8_3
	Premium on Bonds Payable	fill in the blank c4688a025ffefa8_5	fill in the blank c4688a025ffefa8_6
	Cash	fill in the blank c4688a025ffefa8_8	fill in the blank c4688a025ffefa8_9

3. Determine the total interest expense for Year 1. Round to the nearest dollar. $fill in the blank a6d5f6f9d014fb6_1

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

5. Compute the price of $66,498,579 received for the bonds by using Exhibit 5 and Exhibit 7. (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 a6d5f6f9d014fb6_3
Present value of the semi-annual interest payments	$fill in the blank a6d5f6f9d014fb6_4
Price received for the bonds	$fill in the blank a6d5f6f9d014fb6_5