Question
On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $2,400,000 of 8-year, 9% bonds at a market (effective) interest rate of
On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $2,400,000 of 8-year, 9% bonds at a market (effective) interest rate of 10%, receiving cash of $2,269,947. 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. For a compound transaction, if an amount box does not require an entry, leave it blank.
| fill in the blank 676d91f39fecf88_2 | fill in the blank 676d91f39fecf88_3 | ||
| fill in the blank 676d91f39fecf88_5 | fill in the blank 676d91f39fecf88_6 | ||
| fill in the blank 676d91f39fecf88_8 | fill in the blank 676d91f39fecf88_9 |
2. Journalize the entries to record the following: For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answer to the nearest dollar.
a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method.
| fill in the blank 91d598ff4fbefd8_2 | fill in the blank 91d598ff4fbefd8_3 | ||
| fill in the blank 91d598ff4fbefd8_5 | fill in the blank 91d598ff4fbefd8_6 | ||
| fill in the blank 91d598ff4fbefd8_8 | fill in the blank 91d598ff4fbefd8_9 |
b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method.
| fill in the blank 25e3f407efd203d_2 | fill in the blank 25e3f407efd203d_3 | ||
| fill in the blank 25e3f407efd203d_5 | fill in the blank 25e3f407efd203d_6 | ||
| fill in the blank 25e3f407efd203d_8 | fill in the blank 25e3f407efd203d_9 |
3. Determine the total interest expense for Year 1. Round to the nearest dollar. $fill in the blank f2597102f000fdb_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 $2,269,947 received for the bonds by using Table 1, Table 2, Table 3 and Table 4. (Round 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 f2597102f000fdb_3 |
| Present value of the semiannual interest payments | fill in the blank f2597102f000fdb_4 |
| Price received for the bonds | $fill in the blank f2597102f000fdb_5 |
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