On July 1, 20Y1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $1,400,000 of 6-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of $1,339,668. 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	fill in the blank 206a2d04cff7fac_2	fill in the blank 206a2d04cff7fac_3
	Discount on Bonds Payable	fill in the blank 206a2d04cff7fac_5	fill in the blank 206a2d04cff7fac_6
	Bonds Payable	fill in the blank 206a2d04cff7fac_8	fill in the blank 206a2d04cff7fac_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.

	Interest Expense	fill in the blank 18fe38027fb402b_2	fill in the blank 18fe38027fb402b_3
	Discount on Bonds Payable	fill in the blank 18fe38027fb402b_5	fill in the blank 18fe38027fb402b_6
	Cash	fill in the blank 18fe38027fb402b_8	fill in the blank 18fe38027fb402b_9

Feedback

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	fill in the blank 7490ddfd200e03f_2	fill in the blank 7490ddfd200e03f_3
	Discount on Bonds Payable	fill in the blank 7490ddfd200e03f_5	fill in the blank 7490ddfd200e03f_6
	Cash	fill in the blank 7490ddfd200e03f_8	fill in the blank 7490ddfd200e03f_9

Feedback

The straight-line method of amortization provides equal amounts of amortization over the life of the bond.

3. Determine the total interest expense for 20Y1. Round to the nearest dollar. $fill in the blank cc1b8bff3024fbf_1

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

5. Compute the price of $1,339,668 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 cc1b8bff3024fbf_3
Present value of the semiannual interest payments	fill in the blank cc1b8bff3024fbf_4
Price received for the bonds	$fill in the blank cc1b8bff3024fbf_5