Question

Hillside issues $1,000,000 of 6%, 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 $864,113. Required: 1. Prepare the January 1 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 a straight-line amortization table. 5. Prepare the journal entries to record the first two interest payments.

Record the issue of bonds with a par value of $1,000,000 cash on January 1, 2019 at an issue price of $864,113.

For each semiannual period, compute (a) the cash payment, (b) the straight-line discount amortization, and (c) the bond interest expense.

Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.

Prepare the first two years of a straight-line amortization table.

Prepare the journal entries to record the first two interest payments.

Answer 1

Part 1
	Date	Accounts and explanation	Debit(in $)	Credit(in $)
	Jan 1,2019	Cash	8,64,113
		Discount on Bond Payable	1,35,887
		Bond Payable		10,00,000
		(To Bond issued at discount recorded
Part 2
a	Cash Payment($1,000,000*6%*6/12)	$                                                                   30,000
b	Straight-Line discount amortization($135,887/30)	$                                                                     4,530
c	Interest expenses($30,000+$4,530)	$                                                                   34,530
Part 3	Total Bond Interest expenses for the life of Bond =($30,000*30) + $135,887 =$1,035,887
Part 4
Amortization Table-As per Straight-Line method
Date	Interest Payment($1,000,000*3%)	Interest expenses	Discount amorrtization($12926/8)	Unamortized Discount	Closing carrying amount
Col I	Col II	Col III(Col II + Col IV)	Col IV	Col V	Col VI
01-Jan-19				$                            1,35,887	$                         8,64,113
30-Jun-19	$                                                                  30,000	$                                                                   34,530	$                                        4,530	$                            1,31,357	$                         8,68,643
31-Dec-19	$                                                                  30,000	$                                                                   34,530	$                                        4,530	$                            1,26,827	$                         8,73,173
Part 5
Date	Accounts and explanation	Debit(in $)	Credit(in $)
30-Jun-19	Interest expense	$                                                                   34,530
	Cash		$                                      30,000
	Discount on Bond Payable		$                                        4,530
31-Dec-19	Interest expense	$                                                                   34,530
	Cash		$                                      30,000
	Discount on Bond Payable		$                                        4,530