Question

Refer to the bond details in Problem 10-3A.

Required:

1. Compute the total bond interest expense over the bonds' life.

2. Prepare an effective interest amortization table like the one in Exhibit 10B.2 for the bonds' life.

3. Prepare the journal entries to record the first two interest payments.

Answer 1

Required 1
	10	payments of		8125	81250
		par value at maturity			250,000
		Total repaid			331250
		less:Total amount borrowed			255,333
		total bond interest expense			75,917
Required 2
Semi annual	Cash intt	Bont intt	premium	Unamortized	Carrying
intt period	paid	expense	amortization	premium	value
1/1/2019				5,333	255,333
6/30/2019	8125	7592	533	4800	254800
12/31/2019	8125	7592	533	4267	254267
6/30/2020	8125	7592	533	3734	253734
12/31/2020	8125	7592	533	3201	253201
6/30/2021	8125	7592	533	2667	252668
12/30/2021	8125	7592	533	2134	252135
6/30/2022	8125	7592	533	1600	251601
12/31/2022	8125	7592	533	1067	251068
6/30/2023	8125	7592	533	535	250535
12/31/2023	8125	7590	535	0	250000
Total	81250	75917	5333		2,779,342
Required 3
Date	Account titles & Explanations				Debit	Credit
6/30/2018	interest expense				7592
	premium on bonds payable				533
	cash					8125
12/31/2018	interest expense				7592
	premium on bonds payable				533
	cash					8125