Solution 1:
Journal Entries - Hillside | |||
Date | Particulars | Debit | Credit |
1-Jan-17 | Cash A/c Dr | $1,835,994.00 | |
To Bonds payable | $1,500,000.00 | ||
To Premium on issue of bond | $335,994.00 | ||
(To record issue of bond at premium) |
Solution 2a:
Computation of Semiannual cash interest payment | |||
Par (maturity Value) | Annual Rate | Semiannual period | Semiannual cash interest payment |
$1,500,000.00 | 6% | 2 | $45,000.00 |
Solution 2b:
Computation of Semiannual premium amortization | ||||
Bond Price | Par (maturity Value) | Premium on bond payable | Semiannual periods | Straight line premium amortization |
$1,835,994.00 | $1,500,000.00 | $335,994.00 | 30 | $11,200 |
Solution 2c:
Computation of bond interest expense | ||
Semiannual cash payment | Premium amortization | Bond Interest Expense |
$45,000.00 | $11,200 | $33,800 |
Solution 3:
Total bond interest expense over the life of bond | |
Particulars | Amount |
Amount Repaid: | |
30 semiannual interest payments of $45,000 each | $1,350,000.00 |
Par Value at Maturity | $1,500,000.00 |
Total Repaid | $2,850,000.00 |
Less: Amount borrowed | $1,835,994.00 |
Total bond interest expense | $1,014,006.00 |
Solution 4:
First two years amortization table using straight line method | ||
Semiannual period end | Unamortized premium | Carrying value of bond |
1-Jan-17 | $335,994.00 | $1,835,994.00 |
30-Jun-17 | $324,794.00 | $1,824,794.00 |
31-Dec-17 | $313,594.00 | $1,813,594.00 |
30-Jun-18 | $302,394.00 | $1,802,394.00 |
31-Dec-18 | $291,194.00 | $1,791,194.00 |
Solution 5:
Journal Entries - Hillside | |||
Date | Particulars | Debit | Credit |
30-Jun-17 | Interest Expense Dr | $33,800.00 | |
Premium on bond Dr | $11,200.00 | ||
To Cash | $45,000.00 | ||
(Being first semiannual interest payment made and premium amortized) | |||
31-Dec-17 | Interest Expense Dr | $33,800.00 | |
Premium on bond Dr | $11,200.00 | ||
To Cash | $45,000.00 | ||
(Being 2nd semiannual interest payment made and premium amortized) |
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