Question

On January 1, 2015, Rex Co. issued 10-year bonds with a face value of $5,000,000 and a stated interest rate of 12%, payable semiannually on June 30 and December 31. The bonds were sold to yield 10%.

• Prepare the amortization table for the years 2015, 2016 & 2017
• Make the journal entries for 2017
• How much was the interest expense for 2017?

Answer 1

1	Date	Cash Payment	Interest Expense	Bond Premium Amortization	Carrying Amount of Bonds
	Jan 1, 2015				5,623,113
	June 30, 2015	300,000	281,156	18,844	5,604,269
	Dec 30, 2015	300,000	280,213	19,787	5,584,482
	June 30, 2016	300,000	279,224	20,776	5,563,706
	Dec 30, 2016	300,000	278,185	21,815	5,541,891
	June 30, 2017	300,000	277,095	22,905	5,518,986
	Dec 30, 2017	300,000	275,949	24,051	5,494,935
	Issue Price of Bonds
	Face Value	1,884,450
	(5,000,000 x 0.37689)
	Interest Expense	3,738,663
	(300,000 x 12.46221)
		5,623,113
2
Date	Account Titles and Explanation	Debit	Credit
June 30, 2017	Interest Expense	277,095
	Premium on Bonds Payable	22,905
	Cash		300,000
Dec 31, 2017	Interest Expense	275,949
	Premium on Bonds Payable	24,051
	Cash		300,000
3	553,044