Instructions

On July 1, Year 1, Danzer Industries Inc. issued $37,400,000 of 10-year, 8% bonds at a market (effective) interest rate of 10%, receiving cash of $32,739,152. 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.*

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

3.

Determine the total interest expense for Year 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 $32,739,152 received for the bonds by using the present value tables. (Round to the nearest dollar.)

*Refer to the Chart of Accounts for exact wording of account titles.

Bond discount, entries for bonds payable transactions Instructions Present Value Tables Chart of Accounts ournal Final Questions Instructions on July 1 Year 1 Danzer industries Inc issued $37,400,000 or 10-year, 8% bonds at a market effective interest rate of 10%, receiving cash or $32.739, 152. Interest on the bonds is payable seman December 31 and June 30. The fiscal year of the company is the calendar year all On Required: 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2. Journalize e tne entries to record the foilowing: a. The first semiannuai interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method (Round to the nearest doilar.) b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.) 3. Determine the total interest expense for Year 1. 4. WI the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate or interest? 5. Compute the price of S32,739,152 received for the bonds by using the present value tables. (Round to the nearest dollar.) "Refer to the Chart of Accounts for exact wording of account titles Bond discount, entries for b nds payable transactions Instructions Present Value TablesChart of Accounts!Journal Final Questions Present Value Tables Journal Shaded cells have feedba JOURNAL Score: 71/75 ACCOUNTING EQUATION POST. REF DEBIT 32,739,152.00 4,660,848.00 DATE DESCRIPTION CREDIT ASSETS IABILITIESEQUITY Jul.1 Cash Discount on Bonds Payable Bonds Payable 37,400,000.00 Dec. 31 Interest Expense 1,636,958.00 Discount on Bonds Payable 140,958.00 Cash 1,496,000.00 Points13.25/14 Shaded cells have feedback Final Questions 3. Determine the total interest expense for Year 1. S Points:0/1 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? Yes O NO Points: 1/1