Question

Ellis issues 7.5%, five-year bonds dated January 1, 2017, with a $520,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $553,268. The annual market rate is 6% on the issue date. Required: 1. Complete the below table to calculate the total bond interest expense over the bonds' life. 2. Prepare a straight-line amortization table for the bonds' life. 3. Prepare the journal entries to record the first two interest payments. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the journal entries to record the first two interest payments. View transaction list i Record the first interest payment on June 30, 2017. 2 Record the second interest payment on December 31, 2017.

Answer 1

Journal Entries Date Account Title and Explaination Debit Credit Post. Ref. Jun.30 $ 16,173.20 3,326.80 Interest Expense Premium on Bonds Payable ($553268-$520000)/5x6/12 Cash ($520000x7.5%x6/12) |(To record payment of first interest payment) $ 19,500.00 Dec.31 16,173.20 3,326.80 Interest Expense Premium on Bonds Payable ($553268-$520000)/5x6/12 Cash ($520000x7.5%x6/12) |(To record payment of second interest payment) $ 19,500.00