Question
On the first day of its fiscal year, Ebert Company issued $50,000,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The
On the first day of its fiscal year, Ebert Company issued $50,000,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at a market (effective) interest rate of 9%, resulting in Ebert receiving cash of $43,495,895. 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.
| blank | Accounts PayableBonds PayableCashInterest ExpenseInterest PayablePremium on Bonds PayableCash | Cash | Cash |
| Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds PayableDiscount on Bonds Payable | Discount on Bonds Payable | Discount on Bonds Payable | |
| Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds PayableBonds Payable | Bonds Payable | Bonds Payable |
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.
| blank | Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds Payable | - Select - | - Select - |
| Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds Payable | - Select - | - Select - | |
| Accounts PayableBonds PayableCashInterest ExpenseInterest PayablePremium on Bonds Payable | - Select - | - Select - |
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.
| blank | Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds Payable | - Select - | - Select - |
| Accounts PayableBonds PayableDiscount on Bonds PayableInterest ExpenseInterest PayablePremium on Bonds Payable | - Select - | - Select - | |
| Accounts PayableBonds PayableCashInterest ExpenseInterest PayablePremium on Bonds Payable | - Select - | - Select - |
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 | -- |
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