On July 1, 2010, Brower Industries Inc. issued $8,900,000 of 9-year, 10% bonds at an effective interest rate of 12%, receiving cash of $7,936,343. Interest on the bonds is payable semiannually on December 31 and June 30. The fiscal year of the company is the calendar year.

What would the first semiannual interest payment on December 31, 2010, and the amortization of the bond discount, using the straight-line method? (Round to the nearest dollar.)

To calculate the first semiannual interest payment on December 31, 2010, and the amortization of the bond discount using the straight-line method, we first need to determine the amount of interest to be paid every six months and the bond discount to be amortized over the life of the bond.

Step 1: Calculate the semiannual interest payment.
The bond has a face value of $8,900,000 with a coupon rate of 10%. This means the bond will pay $890,000 in interest annually ($8,900,000 * 0.10). To calculate the semiannual interest payment, divide the annual interest payment by 2:

Semiannual interest payment = Annual interest payment / 2
Semiannual interest payment = $890,000 / 2 = $445,000

Step 2: Calculate the bond discount.
The bonds were issued at an effective interest rate of 12%, which is higher than the coupon rate of 10%. As a result, the bonds were sold at a discount to their face value. The difference between the face value ($8,900,000) and the cash received ($7,936,343) is the bond discount:

Bond discount = Face value - Cash received
Bond discount = $8,900,000 - $7,936,343 = $963,657

Step 3: Calculate the amortization of the bond discount using the straight-line method.
The bond discount needs to be amortized over the life of the bond, which is 9 years or 18 semiannual periods (2 periods per year). To calculate the straight-line amortization of the discount, divide the bond discount by the number of semiannual periods:

Amortization of bond discount = Bond discount / Number of semiannual periods
Amortization of bond discount = $963,657 / 18 = $53,536

Step 4: Calculate the first semiannual interest payment on December 31, 2010.
On December 31, 2010, the bond has been outstanding for half a year. Therefore, the interest expense for this period is calculated as follows:

Interest expense = Semiannual interest payment - Amortization of bond discount
Interest expense = $445,000 - $53,536 = $391,464

So, the first semiannual interest payment on December 31, 2010, would be $391,464, and the amortization of the bond discount using the straight-line method would be $53,536.