Question

Hillside issues $2,600,000 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 $3,182,390 Required: 1. Prepare the January 1, 2017, journal entry to record the bonds' issuance. 2a) 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 premium amortization. 2c) 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 2A to 2C Req 5 Req 1 Req 3 Req 4 Prepare the first two years of an amortization table using the straight-line method Unamortized Carrying Value Semiannual Period-End Premium 01/01/2017 06/30/2017 12/31/2017 06/30/2018 12/31/2018 Req 3 Req 5

Answer 1

4. Semi-annual amortization of premium = $582390/30 = $19413

Semiannual Period-End	Unamortized Premium	Carrying Value
01/01/2017	582390	3182390
06/30/2017	562977	3162977
12/31/2017	543564	3143564
06/30/2018	524151	3124151
12/31/2018	504738	3104738

5.

Total bond interest expense over life of bonds:
Amount repaid:
30 payments of $65000*	1950000
Par value at maturity	2600000
Total repaid	4550000
Less amount borrowed	3182390
Total bond interest expense	1367610

*Payment = $2600000 x 5% x 1/2 = $65000