Question

my Hillside issues $1,700,000 of 8% , 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 $1,468,990. 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 Prenare th

Answer 1

Solution 1:

Journal Entries - Hillside
Date	Particulars	Debit	Credit
01-Jan-17	Cash A/c Dr	$14,68,990
	Discount on Bond payable Dr	$2,31,010
	To Bond payable		$17,00,000
	(To record issue of bond at Discount)

Solution 2a, b and c:

Computation of Semiannual cash interest payment
Par (maturity Value)	Annual Rate	Semiannual period	Semiannual cash interest payment
$17,00,000.00	8%	2	$68,000.00

Computation of Semiannual premium amortization
Par (maturity Value)	Bond price	Discount on bond payable	Semiannual periods	Straight line Discount amortization
$17,00,000.00	$14,68,990.00	$2,31,010.00	30	$7,700

Computation of bond interest expense
Semiannual cash payment	Discount amortization	Bond Interest Expense
$68,000	$7,700	$75,700

Solution 3:

Total bond interest expense over the life of bond
Particulars	Amount
Amount Repaid:
30 semiannual interest payments of $68,000 each	$20,40,000.00
Par Value at Maturity	$17,00,000.00
Total Repaid	$37,40,000.00
Less: Amount borrowed	$14,68,990.00
Total bond interest expense	$22,71,010.00

Solution 4:

First two years amortization table using straight line method
Semiannual period end	Unamortized Discount	Carrying value of bond
01-Jan-17	$2,31,010	$14,68,990
30-Jun-17	$2,23,310	$14,76,690
31-Dec-17	$2,15,610	$14,84,390
30-Jun-18	$2,07,910	$14,92,090
31-Dec-18	$2,00,210	$14,99,790

Solution 5:

Journal Entries - Hillside
Date	Particulars	Debit	Credit
30-Jun-17	Interest Expense Dr	$75,700
	To Discount on bond Dr		$7,700
	To Cash		$68,000
	(Being first semiannual interest payment made and Discount amortized)
31-Dec-17	Interest Expense Dr	$75,700
	To Discount on bond Dr		$7,700
	To Cash		$68,000
	(Being 2nd semiannual interest payment made and Discount amortized)