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Bond Discount, Entries for Bonds Payable Transactions On July 1, Year 1, Livingston Corporation, a wholesaler of manufacturing equipment, issued $46,000,000 of 20-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of $42,309,236. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. Required: For all journal entries with a compound transaction, if an amount box does not require an entry, leave it blank. 1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1. Year 1 July 1 fill in the blank d5f60d01dfe0075_2 fill in the blank d5f60d01dfe0075_3 fill in the blank d5f60d01dfe0075_5 fill in the blank d5f60d01dfe0075_6 fill in the blank d5f60d01dfe0075_8 fill in the blank d5f60d01dfe0075_9 2. Journalize the entries to record the following: a. The first semiannual interest payment on December 31, Year 1, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar. ) Year 1 Dec. 31 fill in the blank 4cc83103403c031_2 fill in the blank 4cc83103403c031_3 fill in the blank 4cc83103403c031_5 fill in the blank 4cc83103403c031_6 fill in the blank 4cc83103403c031_8 fill in the blank 4cc83103403c031_9 b. The interest payment on June 30, Year 2, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar. ) Year 2 June 30 fill in the blank 532360023fd8f84_2 fill in the blank 532360023fd8f84_3 fill in the blank 532360023fd8f84_5 fill in the blank 532360023fd8f84_6 fill in the blank 532360023fd8f84_8 fill in the blank 532360023fd8f84_9 3. Determine the total interest expense for Year 1. Round to the nearest dollar. $fill in the blank 24bbf0f8207505a_1 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 $42,309,236 received for the bonds by using

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The entry to record the amount of cash proceeds onJuly1 is:Debit Cash $42,309,236;Debit Discount on Bond payable $3,690,764;Credit Bonds payable $46,000,000.

Journal entries

1. July 1

Debit Cash $42,309,236

Debit Discount on Bond payable $3,690,764

($46,000,000-$42,309,236)

Credit Bonds payable $46,000,000

2a. December 31

Debit Interest Expense $2,327,008

($42,309,236×11%/2)

Credit  Discount on Bond payable $27,008

Credit Cash $2,300,000

($46,000,000×10%/2)

2b. June 30

Debit Debit Interest Expense $2,328,493

[($42,309,236+$27,008)×11%/2]

Credit  Discount on Bond payable $28,493

Credit Cash $2,300,000

($46,000,000×10%/2)

3. Total interest expense for Year 1=$42,309,236×11%/2

Total interest expense for Year 1=$2,327,008

4. Yes, because investor will not pay the face amount of the bonds in a situation were the interest payment received from the bonds is lower than the interest they could have receive if they invested in other bonds.

5. Proceeds of bonds issue

Present value of $1 at 5.5% semiannual rate 0.11746×Face amount of bonds $46,000,000=$5,403,160

Present value of annuity of $1 at 5.5% semiannual rate 16.04612×Semiannual interest payament $2,300,000=$36,906,076

Proceeds of bonds issue $42,309,236

($5,403,160+$36,906,076)

Inconclusion the entry to record the amount of cash proceeds onJuly1 is:Debit Cash $42,309,236;Debit Discount on Bond payable $3,690,764;Credit Bonds payable $46,000,000.

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