On July 1, Year 1, Danzer Industries Inc. issued $47,500,000 of
10-year, 11% bonds at a market (effective) interest rate of 13%,
receiving cash of $42,266,357. Interest on the bonds is payable
semiannually on December 31 and June 30. The fiscal year of the
company is the calendar year. Required: 1. Journalize the entry to
record the amount of cash proceeds from the issuance of the bonds.*
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 interest method.
(Round to the nearest dollar.) b. The interest payment on June 30,
Year 2, and the amortization of the bond discount, using the
interest method. (Round to the nearest dollar.) 3. Determine the
total interest expense for Year 1. *Refer to the Chart of Accounts
for exact wording of account titles.
CHART OF ACCOUNTSDanzer Industries Inc.General Ledger
|
ASSETS |
| 110 |
Cash |
| 111 |
Petty Cash |
| 121 |
Accounts Receivable |
| 122 |
Allowance for Doubtful
Accounts |
| 126 |
Interest Receivable |
| 127 |
Notes Receivable |
| 131 |
Merchandise Inventory |
| 141 |
Office Supplies |
| 142 |
Store Supplies |
| 151 |
Prepaid Insurance |
| 191 |
Land |
| 192 |
Store Equipment |
| 193 |
Accumulated Depreciation-Store
Equipment |
| 194 |
Office Equipment |
| 195 |
Accumulated Depreciation-Office
Equipment |
|
LIABILITIES |
| 210 |
Accounts Payable |
| 221 |
Salaries Payable |
| 231 |
Sales Tax Payable |
| 232 |
Interest Payable |
| 241 |
Notes Payable |
| 251 |
Bonds Payable |
| 252 |
Discount on Bonds Payable |
| 253 |
Premium on Bonds Payable |
|
EQUITY |
| 311 |
Common Stock |
| 312 |
Paid-In Capital in Excess of
Par-Common Stock |
| 315 |
Treasury Stock |
| 321 |
Preferred Stock |
| 322 |
Paid-In Capital in Excess of
Par-Preferred Stock |
| 331 |
Paid-In Capital from Sale of
Treasury Stock |
| 340 |
Retained Earnings |
| 351 |
Cash Dividends |
| 352 |
Stock Dividends |
| 390 |
Income Summary |
|
REVENUE |
| 410 |
Sales |
| 610 |
Interest Revenue |
| 611 |
Gain on Redemption of Bonds |
|
EXPENSES |
| 510 |
Cost of Merchandise Sold |
| 515 |
Credit Card Expense |
| 516 |
Cash Short and Over |
| 521 |
Sales Salaries Expense |
| 522 |
Office Salaries Expense |
| 531 |
Advertising Expense |
| 532 |
Delivery Expense |
| 533 |
Repairs Expense |
| 534 |
Selling Expenses |
| 535 |
Rent Expense |
| 536 |
Insurance Expense |
| 537 |
Office Supplies Expense |
| 538 |
Store Supplies Expense |
| 541 |
Bad Debt Expense |
| 561 |
Depreciation Expense-Store
Equipment |
| 562 |
Depreciation Expense-Office
Equipment |
| 590 |
Miscellaneous Expense |
| 710 |
Interest Expense |
| 711 |
Loss on Redemption of Bonds |