On the first day of its fiscal year, Ebert Company issued $12,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $11,558,459. The company uses the interest method.

Amortize Discount by Interest Method On the first day of its fiscal year, Ebert Company issued $12,000,000 of 5-year, 11% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 12%, resulting in Ebert receiving cash of $11,558,459. The company uses the interest method. a. Journalize the entries to record the following: 1. Sale of the bonds. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. 11,558,459 Cash Discount on Bonds Payable 441,541 Bonds Payable 12,000,000 Feedback Check My Work Bonds Payable is always recorded at face value. Any difference in issue price is reflected in a premium or discount account. 2. First semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank Interest Expense Discount on Bonds Payable Cash 660,000 3. Second semiannual interest payment, including amortization of discount. Round to the nearest dollar. If an amount box does not require an entry, leave it blank. Interest Expense Discount on Bonds Payable 44,154 x Cash 660,000 Feedback Check My Work As the discount or premium is amortized, the carrying amount of the bond changes. As a result, interest expense also changes each period. b. Compute the amount of the bond interest expense for the first year. Round to the nearest dollar. Annual interest paid Discount amortized Interest expense for first year