Question

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. 2b) For each semiannual period, complete the table below to calculate the straight-line premium amortization. 2c) 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 joumal 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 View journal entry worksheet No Date General Journal Debit Credit Cash Jan 01, 2017 1,835,994 Premium on bonds payable Bonds payable 1,500,000 Req 2A to 2C

Answer 1

1)

No.	Date	Account titles and explanation	Debit	Credit
1.	Jan 1, 2017	Cash	$1835994
		Premium on bonds payable (1835994-1500000)		$335994
		Bonds payable		$1500000

2A-C)

Par (maturity) value		Annual rate		Year		Semiannual interest cash payment
$1500000	*	6%	*	6/12	=	$45000
Bond price		Par (maturity) value		Premium on bonds payable		Semiannual periods		Straight line premium amortization
$1835994	-	1500000	=	335994	/	(15*2)= 30	=	11200
Semiannual cash payment		Premium amortization		Bond interest expense
$45000	-	11200	=	$33800

3)

Total interest expense over life of bonds:
Amount repaid:
30 payments of $45000	$1350000
Par value of maturity	1500000
Total repaid	2850000
Less: Amount borrowed	(1835994)
Total bond interest expense	$1014006

4)

Semiannual Period-End	Unamortized Premium	Carrying Value
01/01/2017	$335994	$1835994
06/30/2017	(335994-11200)= 324794	(1835994-11200)= 1824794
12/31/2017	(324794-11200)= 313594	(1824794-11200)= 1813594
06/30/2018	(313594-11200)= 302394	(1813594-11200)= 1802394
12/31/2018	(302394-11200)= 291194	(1802394-11200)= 1791194

5)

Date	Account titles and explanation	Debit	Credit
Jun 30, 2017	Interest expense	$33800
	Premium on bonds payable	$11200
	Cash		$45000
	(To record first interest payment)
Dec 31, 2017	Interest expense	$33800
	Premium on bonds payable	$11200
	Cash		$45000
	(To record first interest payment)