Question

On December 31, 2018, when the market interest rate is 10%, Kennedy Realty issues $300,000 of 11.25%, 10-year bonds payable. The bonds pay interest semiannually. Kennedy Realty received $323,396 in cash at issuance. Requirements 1. Prepare an amortization table using the effective interest amortization method for the first two semiannual interest periods. (Round to the nearest dollar.) 2. Using the amortization table prepared in Requirement 1, journalize issuance of the bonds and the first two interest payments. Requirement 1. Prepare an amortization table using the effective interest amortization method for the first two semiannual interest periods. (Round to the nearest dollar.) Interest Carrying Amount Cash Paid Expense Amortized 12/31/2018 06/30/2019 12/31/2019 Requirement 2. Using the amortization table prepared in Requirement 1, journalize issuance of the bonds and the first two interest payments. (Record debits first, then credits. Select Choose from any list or enter any number in the input fields and then continue to the next question.

Answer 1

1) Amortization table

Date	Cash paid	Interest expense	Premium amortization	Carrying value
12/31/2018				323396
6/30/2019	300000*11.25%*6/12 = 16875	16170	705	322691
12/31/2019	16875	16135	740	321951

Journal entry

Date	account and explanation	Debit	Credit
12/31/18	Cash	323396
	Bonds payable		300000
	Premium on bonds payable		23396
	(To record bond issue)
6/30/19	Interest expense	16170
	Premium on bonds payable	705
	Cash		16875
	(To record interest)
12/31/19	Interest expense	16135
	Premium on bonds payable	740
	Cash		16875
	(To record interest)