Appendix 2: Problem 12-5B
Bonddiscount, entries for bonds payable transactions, interest
method of amortizing bond discount

On July 1, 2010, Linux Corporation, a wholesaler of electronics equipment, issued $45,000,000 of 10-year, 10% bonds at an effective
interest rate of 14%, receiving cash of $35,465,423. Interest on the bonds is payable semiannually on December 31 and June 30. The
fiscal year of the company is the calendar year.

For all journal entries: If an amount box does not require an entry, leave it blank.

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

2. Journalize the entries to record the following:

a. The first semiannual interest payment on December 31, 2010, and the amortization of the bond discount, using the
effective interest rate method. (Round to the nearest dollar.)

b. The interest payment on June 30, 2011, and the amortization of the bond discount, using the effective interest rate
method. (Round to the nearest dollar.)

3. Determine the total interest expense for 2010.

$