Bond Discount, Entries for Bonds Payable Transactions

On July 1, Year 1, Danzer Industries Inc. issued $4,100,000 of7-year, 9% bonds at a market (effective) interest rate of 11%,receiving cash of $3,706,827. Interest on the bonds is payablesemiannually on December 31 and June 30. The fiscal year of thecompany is the calendar year.

Required:

1. Journalize the entry to record the amount ofcash proceeds from the issuance of the bonds on July 1, Year 1. Ifan amount box does not require an entry, leave it blank.

2. Journalize the entries to record thefollowing: If an amount box does not require an entry, leave itblank.

a. The first semiannual interest payment on December 31, Year 1,and the amortization of the bond discount, using the straight-linemethod. (Round your answer to the nearest dollar.)

b. The interest payment on June 30, Year 2, and the amortizationof the bond discount, using the straight-line method. (Round youranswer to the nearest dollar.)

3. Determine the total interest expense forYear 1. Round to the nearest dollar.
$

4. Will the bond proceeds always be less thanthe face amount of the bonds when the contract rate is less thanthe market rate of interest?

5. Compute the price of $3,706,827 received forthe bonds by using Exhibit 5 and Exhibit 7. (Round you PV values to5 decimal places and the final answers to the nearest dollar.) Yourtotal may vary slightly from the price given due to roundingdifferences.

Present value of the face amount	$
Present value of the semi-annual interest payments	$
Price received for the bonds	$