Answer:
1.
Dr. Cash $42,309,236
Dr. Discount on Bond $3,690,764
Cr. Bond payable $46,000,000
2.
a.
December 31, 2014
Dr. Interest Expense $2,392,269.1
Cr. Discount on Bond $92,269.1
Cr. Bond Interest Payable $2,300,000
b.
June 30, 2015
Dr. Interest Expense $2,392,269.1
Cr. Discount on Bond $92,269.1
Cr. Bond Interest Payable $2,300,000
3.
$2,392,269.1
Explanation:
The bond is issued on discount when the bond issuance proceeds are less than the face value of the bond. The discount is expensed over the bond period until maturity. It is added to the interest expense value to expense it.
Discount Value = $46,000,000 - 42,309,236 = $3,690,764
Amortization of Discount = $3,690,764 / (20 x 2) = 92,269.1
Coupon Payment = $46,000,000 x 10% x 6/12 = $2,300,000
Total Interest Expense = $2,300,000 + $92,269.1 = $2,392,269.1
