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Journalize the entry to record the amount of cash proceeds

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Problem - 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.

Required -

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

2. Determine the total interest expense for Year 1.

3. 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?

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

Reference no: EM132692498

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