Problem 1 - On the first day of its fiscal year, Ellis Company issued $12,000,000 of five-year, 10% bonds to finance its operations of producing and selling home improvement products.  Interest is payable semiannually.  The bonds were issued at an effective interest rate of 12%, resulting in Ellis Company receiving cash of $11,116,854.

a) Journalize the entries to record the following:

1. Sale of the bonds

2. First semiannual interest payment.  (Amortization of discount is to be recorded annually.)

3. Second semiannual interest payment.

4. Amortization of discount at the end of the first year, using the straight-line method. (Round to the nearest dollar.)

Problem 2 - Burtard Company develops and sells graphics software for use by architects.  Journalize the entries to record the following selected transactions of Burtard Company:

A. Purchased for cash $450,000 of Blaga Co. 8% bonds at 97 plus accrued interest of $9,000.

B. Received first semiannual interest.

C. Amortized $1,080 of the bond investment at the end of the first year.

D. Sold the bonds at 101 plus accrued interest of $3,000.  The bonds were carried at $442,440 at the time of the sale.