Question - On July 1, 2014, Brower Industries Inc. issued $8,700,000 of 5-year, 8% bonds at a market (effective) interest rate of 10%, receiving cash of $8,028,208. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.
A. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 2014. For a compound transaction, if an amount box does not require an entry, leave it blank.
B. Journalize the entries to record the following: For a compound transaction, if an amount box does not require an entry, leave it blank.
a. The first semiannual interest payment on December 31, 2014, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
b. The interest payment on June 30, 2015, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)
Compute the price of $8,028,208 received for the bonds. Your total may vary slightly from the price given due to rounding differences.
Present value of the face amount
Present value of the semi-annual interest payments
Price received for the bonds