On July 1, Year 1, Danzer Industries Inc. issued $35,400,000 of 10-year, 10% bonds at a market (effective) interest rate of 12%, receiving cash of $31,339,478. 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 less than the market rate of interest? 5. Compute the price of $31,339,478 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. Present Value Tables Two present value tables are provided: Present Value of $1 at Compound Interest Due in n Periods and Present Value of Ordinary Annuity of $1 per Period. Use them as directed in the problem requirements. Periods Present Value of $1 at Compound Interest Due in n Periods 4.0% 4.5% 5% 5.5% 6% 6.5% 0.96154 0.95694 0.95238 0.94787 0.94340 0.93897 7% 1 0.93458 2 0.92456 0.91573 0.90703 0.89845 0.89000 0.88166 0.87344 3 0.88900 0.87630 0.86384 0.85161 0.83962 0.82785 0.81630 4 0.85480 0.83856 0.82270 0.80722 0.79209 0.77732 0.76290 5 0.82193 0.80245 0.78353 0.76513 0.74726 0.72988 0.71299 6 0.79031 0.76790 0.74622 0.72525 0.70496 0.68533 0.66634 7 0.75992 0.73483 0.71068 0.68744 0.66506 0.64351 0.62275 8 0.73069 0.70319 0.67684 0.65160 0.62741 0.60423 0.58201 9 0.70259 0.67290 0.64461 0.61763 0.59190 0.56735 0.54393 10 0.67556 0.64393 0.61391 0.58543 0.55839 0.53273 0.50835 11 0.64958 0.61620 0.58468 0.55491 0.52679 0.50021 0.47509 12 0.62460 0.58966 0.55684 0.52598 0.49697 0.46968 0.44401 13 0.60057 0.56427 0.53032 0.49856 0.46884 0.44102 0.41496 14 0.57748 0.53997 0.50507 0.47257 0.44230 0.41410 0.38782 15 0.55526 0.51672 0.48102 0.44793 0.41727 0.38883 0.36245 16 0.53391 0.49447 0.45811 0.42458 0.39365 0.36510 0.33873 17 0.51337 0.47318 0.43630 0.40245 0.37136 0.34281 0.31657 18 0.49363 0.45280 0.41552 0.38147 0.35034 0.32189 0.29586 19 0.47464 0.43330 0.39573 0.36158 0.33051 0.30224 0.27651 20 0.45639 0.41464 0.37689 0.34273 0.31180 0.28380 0.25842 Present Value Tables 20 0.45639 0.41464 0.37689 0.34273 0.31180 0.28380 0.25842 21 0.43883 0.39679 0.35894 0.32486 0.29416 0.26648 0.24151 22 0.42196 0.34185 0.30793 0.27751 0.25021 0.22571 0.37970 0.36335 23 0.40573 0.32557 0.29187 0.26180 0.23494 0.21095 24 0.39012 0.34770 0.31007 0.27666 0.24698 0.22060 0.19715 25 0.37512 0.33273 0.29530 0.26223 0.23300 0.20714 0.18425 26 0.36069 0.31840 0.28124 0.24856 0.21981 0.19450 0.17220 27 0.34682 0.30469 0.26785 0.23560 0.20737 0.18263 0.16093 28 0.33348 0.29157 0.25509 0.22332 0.19563 0.17148 0.15040 29 0.32065 0.27902 0.24295 0.21168 0.18456 0.16101 0.14056 30 0.30832 0.26700 0.23138 0.20064 0.17411 0.15119 0.13137 31 0.29646 0.25550 0.22036 0.19018 0.16425 0.14196 0.12277 32 0.28506 0.24450 0.20987 0.18027 0.15496 0.13329 0.11474 33 0.27409 0.23397 0.19987 0.17087 0.14619 0.12516 0.10723 34 0.26355 0.22390 0.19035 0.16196 0.13791 0.11752 0.10022 35 0.25342 0.21425 0.18129 0.15352 0.13011 0.11035 0.09366 40 0.20829 0.17193 0.14205 0.11746 0.09722 0.08054 0.06678 45 0.17120 0.13796 0.11130 0.08988 0.07265 0.05879 0.04761 50 0.14071 0.11071 0.08720 0.06877 0.05429 0.04291 0.03395 Periods 4.0% Present Value of Ordinary Annuity of $1 per Period 4.5% 5% 5.5% 6% 0.95694 0.95238 0.94787 0.94340 6.5% 7% 1 0.96154 0.93897 0.93458 1.88609 1.87267 1.85941 1.84632 1.83339 1.82063 1.80802 N 3 2.77509 2.74896 2.72325 2.69793 2.67301 2.64848 2.62432 4 3.62990 3.58753 3.54595 3.50515 3.46511 3.42580 3.38721 4.45182 4.38998 4.32948 4.27028 4.21236 4.15568 4.10020 6 5.24214 5.15787 5.07569 4.99553 4.91732 4.84101 4.76654 7 6.00205 5.89270 5.78637 5.68297 5.58238 5.48452 5.38929 8 6.73274 6.59589 6.46321 6.33457 6.20979 6.08875 5.97130 9 7.43533 7.26879 7.10782 6.95220 6.80169 6.65610 6.51523 10 8.11090 7.91272 7.72173 7.53763 7.36009 7.18883 7.02358 11 8.76048 8.52892 8.30641 8.09254 7.88687 7.68904 7.49867 12 9.38507 8.86325 8.61852 8.38384 8.15873 7.94269 9.11858 9.68285 13 9.98565 9.39357 9.11708 8.85268 8.59974 8.35765 10.56312 10.22283 9.89864 9.58965 9.29498 9.01384 8.74547 14 15 11.11839 10.73955 10.37966 10.03758 9.71225 9.40267 9.10791 16 11.65230 11.23402 10.83777 10.46216 10.10590 9.76776 9.44665 17 12.16567 11.70719 11.27407 10.86461 10.47726 10.11058 9.76322 18 12.65930 12.15999 11.68959 11.24607 10.82760 10.43247 10.05909 19 13.13394 12.59329 12.08532 11.60765 11.15812 10.73471 10.33560 20 13.59033 13.00794 12.46221 11.95038 11.46992 11.01851 10.59401 21 14.02916 13.40472 12.82115 12.27524 11.76408 11.28498 10.83553 22 14.45112 13.78442 13.16300 12.58317 12.04158 11.53520 11.06124 2 14.45112 13.78442 13.16300 12.5837 12.04158 11.53520 11.06124 23 14.85684 14.14777 13.48857 12.7504 12.30338 11.77014 11.27219 24 15.24696 14.49548 13.79864 13.15170 1255036 11.99074 11.46933 25 15.62208 14.82821 14.09394 13.41393 12.78336 12.19788 11.65358 25 15.98277 15.14661 14.37519 13.66250 12.39237 11.82578 13.00317 13.21053 27 16.32959 15.45130 14.64303 13.89810 12.57500 11.98671 28 16.66306 15.74287 14.89813 14.12142 13.40616 12.74648 12.13711 29 16.98371 16.02189 15.1417 14.33310 13.59072 12.90749 12.27767 30 17.29203 16.28888 15.37245 14.53375 13.76483 13.05868 12.40904 31 17.58849 6.54439 15.59281 14.72393 13.92909 13.20063 12.53181 32 17.87355 6.78889 15.80268 14.90420 14.08404 13.33393 12.64656 33 18.14765 17.02286 16.00255 15.07507 14.23023 13.45909 12.75379 4 18.41120 17.24676 16.19290 15.23703 14.36814 13.57661 12.5401 35 18.66461 17.46101 16.37419 15.39055 14.49825 13.68696 12.94767 40 19.7927 18.40 158 17.15909 16.04612 15.04630 14.14553 13.3171 45 20.72004 19.15635 17.7407 16.54773 15.4553 14.48023 13.60552 50 21.48218 19.76201 18.25593 16.93152 15.7616 14.72452 13.80075 CHART OF ACCOUNTS Danzer Industries Inc. General Ledger REVENUE 410 Sales 610 Interest Revenue 611 Gain on Redemption of Bonds ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable 122 Allowance for Doubtful Accounts 126 Interest Receivable 127 Notes Receivable 131 Merchandise Inventory 141 Office Supplies 142 Store Supplies 151 Prepaid Insurance 191 Land 192 Store Equipment 193 Accumulated Depreciation Store Equipment 194 Office Equipment 195 Accumulated Depreciation Office Equipment EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 521 Sales Salaries Expense 522 Office Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Repairs Expense 534 Selling Expenses 535 Rent Expense 536 Insurance Expense LIABILITIES 210 Accounts Payable 221 Salaries Payable 231 Sales Tax Payable 232 Interest Payable 241 Notes Payable 251 Bonds Payable 252 Discount on Bonds Payable 253 Premium on Bonds Payable 537 Office Supplies Expense 538 Store Supplies Expense 541 Bad Debt Expense 561 Depreciation Expense-Store Equipment 562 Depreciation Expense-Office Equipment 590 Miscellaneous Expense 710 Interest Expense 711 Loss on Redemption of Bonds EQUITY 311 Common Stock 312 Paid-in Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. 2a. Journalize the entry to record 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.) Refer to the Chart of Accounts for exact wording of account titles. PAGE 10 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST, REF DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 5 26. Journalize the entry to record 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.) PAGE 10 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 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? Yes O No 5. Compute the price of $31,339,478 received for the bonds by using the tables shown in Present Value Tables (Round to the nearest dollar.) Present value of the face amount $ Present value of the semiannual interest payments Price received for the bonds $