Question

Hillside issues $1,800,000 of 7%, 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 $1,555,401 Required: 1. Prepare the January 1, 2017, journal entry to record the bonds' issuance. 2(a) 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 discount amortization 2(c) 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 1 Req 2A to 2C Req 3 Req 4 Req 5 Prepare the January 1, 2017, journal entry to record the bonds' issuance View transaction list

Answer 1

Req 1.
Total Par value of bonds			1800000
Less: Issue price			1555401
Discount on bonds payable			244599
Journal entry for issuance:
Accounts title and explanations			Debit $	Credit $
Cash account			1555401
Discount on bonds payable			244599
Bonds payable				1800000
(for bonds issued at discount)
Req 2-a:
par Value *		Annual rate*		Year =	Semi Annual cash interest
1800000		7%		0.5	63000
Req 2-b:
Par value-	Bond price     =		Discount on Bonds /		Semi annual periods =		Straight line amortization
1800000	1555401		244599 /		30		8153.3
Req 2-c
Semi annual cash interest +			Discount Amortization=			Bond Interest expenses
63000     +			8153.3			71153.3
Req 3.
Amount repaid:
30 payments of 63000 each			1890000
Par value of maturity			1800000
Total repaiid			3690000
Less: Amount borrowed			1555401
Total Bond interest expense			2134599
Req 4.
Amort table:
Period		Unamortized		Carrying
		discount		value
01.01.17		244599		1555401
30.06.17		236445.7		1563554
31.12.17		228292.4		1571708
30.06.18		220139.1		1579861
31.12.18		211985.8		1588014
Req 5.
Journal entry for interest
Date	Accounts title and explanations			Debit $	Credit $
30.06.17	Interest expenses Dr.			71153.3
	Cash account				63000
	Discount on bonds payable				8153.3
	(for first semi annual interest paid)
31.12.17	Interest expenses Dr.			71153.3
	Cash account				63000
	Discount on bonds payable				8153.3
	(for interest paid for second semi annual period)