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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 the company is the calendar year.


1. Journalize entry to record amount of cash proceeds from sale of the bonds.

2. Journalize entries to record the following::

a. First semiannual interest payment on December 31, 2010, and amortization of bond discount, by using straight-line method. (Round to the nearest dollar)

b. Interest payment on June 30, 2011, and amortization of bond discount using straight-line method. (Round to the nearest dollar)

3. Find out total interest expense for 2010.

4. Will the bond proceeds always be less that face amount of bonds when contract rate is less that market rate of interest?

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  • Category:- Accounting Basics
  • Reference No.:- M921429

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