Financial and Managerial Accounting: PR14-3A Maui Blends, Inc. produces and sells organically

Financial and Managerial AccountingPR14-3A Bond Premium, Entries for Bonds Payable Transactions 
Maui Blends, Inc. produces and sells organically grown coffee. On July 1, 2014, Maui Blends, Inc. issued $3,000,000 of 5-year, 12% bonds at a market (effective) interest rate of 10%, receiving cash of $3,461,181. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year. 

Instructions: 
1. Journalize the entry to record the amount of cash proceeds from the issuance of the bonds on July 1, 2014. 
2. Journalize the entries to record the following: 
a. The first semiannual interest payment on December 31, 2014, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) 
b. The interest payment on June 30, 2015, and the amortization of the bond premium, using the straight-line method. (Round to the nearest dollar.) 
3. Determine the total interest expense for 2014. Round to the nearest dollar. 
4. Will the bond proceeds always be greater than the face amount of the bonds when the contract rate is greater than the market rate of interest? 
5. Compute the price of $3,461,181 received for the bonds by using Table 1 and Table 2. (Round to the nearest dollar.) Your total may vary slightly from the price given due to rounding differences. 
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