On July 1, Year 1, Danzer Industries Inc. issued $25,000,000 of 20-year, 11% bonds at a market (effective) interest rate of 14%, receiving cash of $20,001,500. 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.

Year 1 July 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 interest method. (Round to the nearest dollar.)

Year 1 Dec. 31

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

Year 2 June 30

3. Determine the total interest expense for Year 1. $