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Problem 12-2 (Algorithmic) Bond Discount, Entries for Bonds Payable Transactions On July 1, 2012, Brower Industries Inc.

Problem 12-2 (Algorithmic)
Bond Discount, Entries for Bonds Payable Transactions

On July 1, 2012, Brower Industries Inc. issued $8,700,000 of 4-year, 10% bonds at a market (effective) interest rate of 11%, receiving cash of $8,424,446. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year


Journalize the entry to record the amount of cash proceeds from the sale of the bonds. For a compound transaction, if an amount box does not require an entry, leave it blank.


Journalize the entries to record the following: (For a compound transaction, if an amount box does not require an entry, leave it blank.)

a. The first semiannual interest payment on December 31, 2012, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)



The interest payment on June 30, 2013, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar.)





3. Determine the total interest expense for 2012.
$

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?
SelectYesNo

5. Compute the price of $8,424,446 received for the bonds by using the tables of present value in Appendix A. (Round to the nearest dollar.) Your total may vary slightly from the price given due to rounding differences.



Present value of the face amount

$



Present value of the semi-annual interest payments

$



Price received for the bonds

$



























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Question: Problem 12-2...

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