Question

Instructions On July 1, 20Y1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of $37,282,062. 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. * 2. Journalize the entries to record the following:* a. The first semiannual interest payment on December 31, 20Y1, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.) b. The interest payment on June 30, 20Y2, and the amortization of the bond discount, using the interest method. (Round to the nearest dollar.) 3. Determine the total interest expense for 20Y1. *Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Date	Description	Debit	Credit	Assets	Liabilities	Equity
July 1,20Y1	Cash	37282062		↑
	Discount on Bonds payable	2717938			↓
	Bonds payable		40000000		↑
Dec 31,20Y1	Interest expense	1491282				↓
	Discount on Bonds payable		91282		↑
	Cash		1400000	↓
Jun 30,20Y2	Interest expense	1494934				↓
	Discount on Bonds payable		94934		↑
	Cash		1400000	↓
3
	Total interest expense for 20Y1	1491282
	Workings:
Dec 31,20Y1	Interest expense	1491282	=37282062*8%/2
Jun 30,20Y2	Interest expense	1494934	=(37282062+91282)*8%/2