Question

Instructions: Complete all green highlighted cells. Use the drop down lists when necessary. For all other answers, create a formula to arrive at your answer. DO NOT HARDKEY YOUR ANSWERS UNLESS TOLD SPECIFICALLY TO DO SO!! Tyler Co. issues $180,000 of 11%, three-year bonds dated January 1, 2019, that pay interest semiannually on June 30 and December 31. They are issued at $184,566 when the market rate is 10%. 1. Prepare the January 1 journal entry to record the bonds' issuance. (Hardkeying is permitted for monetary answers on this question.) Account Debit Credit 2. Determine the total bond interest expense to be recognized over the life of the bonds. 3. Prepare an effective interest amortization table for the bonds' first two years. Bond Interest Expense Amortization of Unamortized Premium/Discount Premium/Discount Date Cash Interest Paid Carrying Value

Answer 1

Solution 1:

Account	Debit	Credit
Cash	$1,84,566
To bonds payable		$1,80,000
To Premium on bonds Payable		$4,566

Solution 2:

Total bond interest expense over the life of bond
Particulars	Amount
Amount Repaid:
6 payments of ($180,000*11%*6/12=) $9900 each	$59,400
Par Value at Maturity	$1,80,000
Total Repaid	$2,39,400
Less: Amount borrowed	$1,84,566
Total bond interest expense over life of Bond	$54,834

Solution 3:

Bond Amortization Schedule
Date	Cash payment	Interest Expense	Premium amortization	Unamortized premium	Carrying value of bond
01-Jan-19				$4,566	$1,84,566
30-Jun-19	$9,900	$9,228	$672	3,894	$1,83,894
31-Dec-19	$9,900	$9,195	$705	3,189	$1,83,189
30-Jun-20	$9,900	$9,159	$741	2,448	$1,82,448
31-Dec-20	$9,900	$9,122	$778	1,671	$1,81,671