Question

Hillside issues $1,500,000 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 $1,296,168. 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

Answer 1

Solution:

Requirement:1

Date	Account Titles and Explanation	Debit	Credit
1/1/2019	Cash	$        1,296,168
	Discount on Bands Payable	$            203,832
	Bonds Payable		$     1,500,000
	( To record bonds issue)

Requirement: 2A ,2B, 2C

2[a]		2[b]		2[c]
Semi-Annual Period	Cash Payment	Semi-Annual Period	Discount Amortization	Semi-Annual Period	Interest Expense
30/6/2019	$        45,000	30/6/2019	$          6,794	30/6/2019	$         51,794
31/12/2019	$        45,000	31/12/2019	$          6,794	31/12/2019	$         51,794
30/6/2020	$        45,000	30/6/2020	$          6,794	30/6/2020	$         51,794
31/12/2020	$        45,000	31/12/2020	$          6,794	31/12/2020	$         51,794
30/6/2021	$        45,000	30/6/2021	$          6,794	30/6/2021	$         51,794
31/12/2021	$        45,000	31/12/2021	$          6,794	31/12/2021	$         51,794
30/6/2022	$        45,000	30/6/2022	$          6,794	30/6/2022	$         51,794
31/12/2022	$        45,000	31/12/2022	$          6,794	31/12/2022	$         51,794
30/6/2023	$        45,000	30/6/2023	$          6,794	30/6/2023	$         51,794
31/12/2023	$        45,000	31/12/2023	$          6,794	31/12/2023	$         51,794
30/6/2024	$        45,000	30/6/2024	$          6,794	30/6/2024	$         51,794
31/12/2024	$        45,000	31/12/2024	$          6,794	31/12/2024	$         51,794
30/6/2025	$        45,000	30/6/2025	$          6,794	30/6/2025	$         51,794
31/12/2025	$        45,000	31/12/2025	$          6,794	31/12/2025	$         51,794
30/6/2026	$        45,000	30/6/2026	$          6,794	30/6/2026	$         51,794
31/12/2026	$        45,000	31/12/2026	$          6,794	31/12/2026	$         51,794
30/6/2027	$        45,000	30/6/2027	$          6,794	30/6/2027	$         51,794
31/12/2027	$        45,000	31/12/2027	$          6,794	31/12/2027	$         51,794
30/6/2028	$        45,000	30/6/2028	$          6,794	30/6/2028	$         51,794
31/12/2028	$        45,000	31/12/2028	$          6,794	31/12/2028	$         51,794
30/6/2029	$        45,000	30/6/2029	$          6,794	30/6/2029	$         51,794
31/12/2029	$        45,000	31/12/2029	$          6,794	31/12/2029	$         51,794
30/6/2030	$        45,000	30/6/2030	$          6,794	30/6/2030	$         51,794
31/12/2030	$        45,000	31/12/2030	$          6,794	31/12/2030	$         51,794
30/6/2031	$        45,000	30/6/2031	$          6,794	30/6/2031	$         51,794
31/12/2031	$        45,000	31/12/2031	$          6,794	31/12/2031	$         51,794
30/6/2032	$        45,000	30/6/2032	$          6,794	30/6/2032	$         51,794
31/12/2032	$        45,000	31/12/2032	$          6,794	31/12/2032	$         51,794
30/6/2033	$        45,000	30/6/2033	$          6,794	30/6/2033	$         51,794
31/12/2033	$        45,000	31/12/2033	$          6,794	31/12/2033	$         51,794
Total	$ 1,350,000		$     203,832		$   1,553,832

Requirement:3

Total bond interest expense to be recognized over the bonds' life = $ 1,553,832

Requirement:4

BOND DISCOUNT AMORTIZATION
STRAIGHT LINE METHOD-SEMIANNUAL INTEREST PAYMENTS
Semi-Annual Period	Cash Payment	Interest Expense	Discount Amortization	Carrying Value
1/1/2019				$           1,296,168
30/6/2019	$                 45,000	$                    51,794	$                  6,794	$           1,302,962
31/12/2019	$                 45,000	$                    51,794	$                  6,794	$           1,309,757
30/6/2020	$                 45,000	$                    51,794	$                  6,794	$           1,316,551
31/12/2020	$                 45,000	$                    51,794	$                  6,794	$           1,323,346

Requirement:5

No.	Date	Account Titles and Explanation	Debit	Credit
2	30/6/2019	Interest Expense	$              51,794
		Discount on Bonds Payable		$             6,794
		Cash		$           45,000
		( To record interest expense paid)
3	31/12/2019	Interest Expense	$              51,794
		Discount on Bonds Payable		$             6,794
		Cash		$           45,000
		( To record interest expense paid)