Q1) On July 1, 2010, Brower Industries Inc. issued $32,000,000 of 10-year, 12% bonds at the effective interest rate of 13% receiving cash of $30,237,139. Interest on bonds is payable semiannually on December 31 and June 30. Fiscal year of company is calendar year.
1. Journalize entry to record amount of cash proceeds from sale of the bonds.
2. Journalize entries to record following::
a. First semiannual interest payment on December 31, 2010, and the amortization of the bond discount, using the straight-line method. (Round to the nearest dollar)
b. Interest payment on June 30, 2011, and amortization of bond discount by using straight-line method.
3. Find out total interest expense for 2010.
4. Will bond proceeds always be less that face amount of bonds when contract rate is less that market rate of interest?