Question

Hillside issues $2,100,000 of 5%, 15-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,814,635. Required: 1. Prepare the January 1, 2017, journal entry to record the bonds' issuance. 2(a) For each semiannual period, complete the table below to calculate the cash payment. 2(b) For each semiannual period, complete the table below to calculate the straight-line discount amortization 2(c) For each semiannual period, complete the table below to calculate the bond interest expense. 3. Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life. 4. Prepare the first two years of an amortization table using the straight-line method. 5. Prepare the journal entries to record the first two interest payments. Complete this question by entering your answers in the tabs below. Req 1 Req 2A to 2C Req 3 Req 4 Req 5 Prepare the January 1, 2017, journal entry to record the bonds' issuance. View transaction list Journal entry worksheet 1 Record the issue of bonds with a par value of $2,100,000 cash on January 1, 2017 at an issue price of $1,814,635. Note: Enter debits before credits. Credit Date General Journal Debit Jan 01, 2017

Answer 1

1
Date	General Journal	Debit	Credit
Jan 1,2017	Cash	1,814,635
	Discount on bonds payable	285,365
	Bonds payable		2,100,000
2a
Par (maturity) value		Annual Rate		Year		Semiannual cash interest payment
$2,100,000	x	5%	x	6/12	=	$52,500
b
Par (maturity) value		Bonds price		Discount on Bonds Payable		Semiannual periods		Straight-line discount amortization
$2,100,000	-	$1,814,635	=	$285,365	÷	30	=	$9,512
c
Semiannual cash payment		Discount amortization		Bond interest expense
$52,500	+	$9,512	=	$62,012
3
Total bond interest expense over life of bonds:
Amount repaid:
30	payments of	$52,500	1575000
Par value at maturity			2,100,000
Total repaid			3675000
Less amount borrowed			1,814,635
Total bond interest expense			1,860,365
4
Semiannual Period-End	Unamortized Discount	Carrying Value
1/1/2017	$285,365	$1,814,635
6/30/2017	275,853	$1,824,147
12/31/2017	266,341	$1,833,659
6/30/2018	256,829	$1,843,171
12/31/2018	247,317	$1,852,683
Date	General Journal	Debit	Credit
30-Jun-17	Bond interest expense	62,012
	Discount on bonds payable		9,512
	Cash		52,500
31-Dec-17	Bond interest expense	62,012
	Discount on bonds payable		9,512
	Cash		52,500