The interest on the bonds is payable semiannually on December 31 and June 30. So, the fiscal year of the company is the calendar year.
Given,
Cash = $40,003,000
Dr Discount on bonds payable = $3,690,764
Cr Bonds payable = $50,000,000
The being issue of the bonds is at discount.
The cash proceeds which were received from the bond issuance of $40,003,000 is lower than the face value of the bond of $50,000,00. Thus, it is safe to say that the bonds were issued at discount of $9,997,000 ($50,000,000 - $40,003,000).
However, the correct entries would be to debit cash account with $40,003,000 debit discount on bonds payable with $9,997,000 and credit bonds payable with $50,000,000.
Hence, the fiscal year of the company is the calendar year.
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