Question

On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $7,700,000 of 8-year, 9% bonds at a market (effective interest rate of 10%, receiving cash of $7,282,746. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: 2. Journalize the entries to record the following: For a compound transaction, if an amount box does not require an entry, leave it blank. Round your answer to the nearest dollar. a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. Interest Expense Discount on Bonds Payable Cash b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. Interest Expense Discount on Bonds Payable -59 99 Cash 3. Determine the total interest expense for Year 1. Round to the nearest dollar 4. Will the bond proceeds always be less than the face amount of the bonds when the contract rate is less than the market rate of interest? 5. Compute the price of $7,282,746 received for the bonds by using Table 1, Table 2, Table 3 and Table 4. (Round to the nearest dollar.) Your total may vary slightly from the price given due to rounding differences. Present value of the face amount Present value of the semiannual interest payments Price received for the bonds

Answer 1

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Answer-

Solution Date Date Account Title Dr. cr. July', Year! Cash Discount on Bonds layable 7,282,746 417,254 2200,000 Bond Payable 320,422 26,078 396,500 Dec.31, Yearl Bond Interest Expenses Discount on bonds Payable. Cash (7,700,000*4.5) June 30, Yeone Bond Interest Expenses Discount on Bond Payable Cash (7,700,000* 4.5) 320,422 26,078 346,500 Total Int Exp- for year 1=$320,422 Answer 3 з Ansurr 4 = yes. Scanned by TapScanner