Question

Problem 10-1A Straight-Line: Amortization of bond discount LO P2 Hillside issues $2,900,000 of 9%, 15-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $2,505,923. Required: 1. Prepare the January 1 journal entry to record the bonds' issuance. 2a) 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 a straight-line amortization table. 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 20 Reg 3 Req 4 Reg 5 Prepare the January 1 journal entry to record the bonds' issuance. View transaction list Journal entry worksheet Record the issue of bonds with a par value of $2,900,000 cash on January 1, 2019 at an issue price of $2,505,923. Note: Enter debits before credits. General Journal Debit Credit Date January 01

Answer 1

1
Date	General Journal	Debit	Credit
January 01	Cash	2,505,923
	Discount on bonds payable	394,077
	Bonds payable		2,900,000
2a
Par (maturity) value		Annual Rate		Year		Semiannual cash interest payment
$2,900,000	x	9%	x	6/12	=	$130,500
b
Par (maturity) value		Bonds price		Discount on Bonds Payable		Semiannual periods		Straight-line discount amortization
$2,900,000	-	$2,505,923	=	$394,077	÷	30	=	$13,136
c
Semiannual cash payment		Discount amortization		Bond interest expense
$130,500	+	$13,136	=	$143,636
3
Total bond interest expense over life of bonds:
Amount repaid:
30	payments of	$130,500	3915000
Par value at maturity			2,900,000
Total repaid			6815000
Less amount borrowed			2,505,923
Total bond interest expense			4,309,077
4
Semiannual Period-End	Unamortized Discount	Carrying Value
1/1/2019	$394,077	$2,505,923
6/30/2019	380,941	$2,519,059
12/31/2019	367,805	$2,532,195
6/30/2020	354,669	$2,545,331
12/31/2020	341,533	$2,558,467
5
Date	General Journal	Debit	Credit
June 30	Bond interest expense	143,636
	Discount on bonds payable		13,136
	Cash		130,500
December 31	Bond interest expense	143,636
	Discount on bonds payable		13,136
	Cash		130,500