On the first day of its fiscal year, Elbert company issued $50,000,000 of 10-year, 7% bonds to finance its operations. Interest is payable semiannually. The bonds were issued at market (effective) interest rate of 9%, resulting in Elbert company receiving cash of 43,495,895. The company uses interest method.
a. Journalize the enteries to record the following:
1. Sales of the bonds
2. First semiannual interest payment, including amortization of discount.
3. Second semiannual interest payment, including amortization of discount.
B. Compute the amount of the bond expense for the first year.