Question

Ellis issues 7.0%, five-year bonds dated January 1, 2018, with a $450,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $469,193. 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 Complete the below table to calculate the total bond interest expense over the bonds' life. Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity Total repaid Less amount borrowed Total bond interest expense
Required 3:

Journal Entry (1) - Record the first interest payment on June 30, 2018.

Journal Entry (2) - Record the second interest payment on December 31, 2018.

Answer 1

Solution 1:

- AR УИ Total bond interest expense Over life of bonds: Amount Paid: 10 Payments of ($450,000*7%*6/12=$15750) each Par Value at maturity Total Repaid Less: Amount Borrowed Total Bond interest Expense $157,500 $450,000 $607,500 $469,193 $138,3071 12 13 14 15 16 18 20 23 24 25 26 31 33 34 42 44 45 46 Sheet474 Sheet475 Sheet477 Sheet31 (7) She

Solution 2:

N VK ooo nowe wn 10 11 12 Straight line Amortizatiin Table Semiannual period-End Unamortized premium Carrying value 01/01/2018 19193 469193 6/30/2018 17274 467274 12/31/2018 15354 465354 6/30/2019 13435 463435 12/31/2019 11516 461516 6/30/2020 9597 459597 12/31/2020 7677 457677 6/30/2021 5758 455758 12/31/2021 3839 453839 6/30/2022 1919 451919 12/31/2022 450000 Total 13 14 15 16 17 18 19 20 21 29 39 40 42 47 48 Sheet474 Sheet475 Sheet477 Sheet31 (7) She

Solution 3:

Yk 3 Credit Date Account title 30-Jun-18 Bond Interest Expense Dr Premium on Bond Cash Debit 13831 1919 5750 3831 31-Dec-18 Bond Interest Expense Dr Premium on Bond Cash 1919 5750 Sheet474 Sheet475 Sheet477 Sheet31 (7) She