On January 1, the first day of its fiscal year, Pretender Company issued $18,500,000 of five-year, 10% bonds to finance its operations of producing and selling home improvement products. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Pretender Company receiving cash of $17,138,298.

Required:

A.

Journalize the entries to record the following (refer to the Chart of Accounts for exact wording of account titles):

1.	Issuance of the bonds.
2.	First semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)
3.	Second semiannual interest payment. The bond discount is combined with the semiannual interest payment. (Round your answer to the nearest dollar.)

B.

Determine the amount of the bond interest expense for the first year.

C.

Explain why the company was able to issue the bonds for only $17,138,298 rather than for the face amount of $18,500,000.

. Determine the amount of the bond interest expense for the first year.

$

Score: 94/112

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	Jan. 1	Cash		17,138,298.00
2		Discount on Bonds Payable		1,361,702.00
3		Bonds Payable			18,500,000.00
4	Jun. 30	Interest Expense
5		Cash			925,000.00
6		Discount on Bonds Payable
7	Dec. 31	Interest Expense
8		Cash			925,000.00
9		Discount on Bonds Payable