1. Business
  2. Accounting
  3. on july 1 year 1 danzer industries inc issued 40000000...

Question: on july 1 year 1 danzer industries inc issued 40000000...

Question details

On July 1, Year 1, Danzer Industries Inc. issued $40,000,000 of 10-year, 7% bonds at a market (effective) interest rate of 8%, receiving cash of $37,282,062. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

Instructions

1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, Year 1.

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.)

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.)

3. Determine the total interest expense for Year 1.

4.Compute the price of $37,282,062 received for the bonds by using the present value tables in Appendix A.

Present value of $1 for 20 semiannual periods at 4.0% semiannual rate Answer:______
Face amount of bonds Answer:______
Present value of bond face amount Answer:______
Present value of an annuity of $1 for 20 periods at 4.0% Answer:______
Semiannual interest payment Answer:______
Present value of semiannual interest payment Answer:______
Total present value of the bond (proceeds) Answer:______


Appendix A

Present Value of $1 at Compound Interest Due in n Periods
Periods 4.0% 4.5% 5% 5.5% 6% 6.5% 7%
  1 0.96154 0.95694 0.95238 0.94787 0.94340 0.93897 0.93458
  2 0.92456 0.91573 0.90703 0.89845 0.89000 0.88166 0.87344
  3 0.88900 0.87630 0.86384 0.85161 0.83962 0.82785 0.81630
  4 0.85480 0.83856 0.82270 0.80722 0.79209 0.77732 0.76290
  5 0.82193 0.80245 0.78353 0.76513 0.74726 0.72988 0.71299
  6 0.79031 0.76790 0.74622 0.72525 0.70496 0.68533 0.66634
  7 0.75992 0.73483 0.71068 0.68744 0.66506 0.64351 0.62275
  8 0.73069 0.70319 0.67684 0.65160 0.62741 0.60423 0.58201
  9 0.70259 0.67290 0.64461 0.61763 0.59190 0.56735 0.54393
10 0.67556 0.64393 0.61391 0.58543 0.55839 0.53273 0.50835
11 0.64958 0.61620 0.58468 0.55491 0.52679 0.50021 0.47509
12 0.62460 0.58966 0.55684 0.52598 0.49697 0.46968 0.44401
13 0.60057 0.56427 0.53032 0.49856 0.46884 0.44102 0.41496
14 0.57748 0.53997 0.50507 0.47257 0.44230 0.41410 0.38782
15 0.55526 0.51672 0.48102 0.44793 0.41727 0.38883 0.36245
16 0.53391 0.49447 0.45811 0.42458 0.39365 0.36510 0.33873
17 0.51337 0.47318 0.43630 0.40245 0.37136 0.34281 0.31657
18 0.49363 0.45280 0.41552 0.38147 0.35034 0.32189 0.29586
19 0.47464 0.43330 0.39573 0.36158 0.33051 0.30224 0.27651
20 0.45639 0.41464 0.37689 0.34273 0.31180 0.28380 0.25842
Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution