Question

Hillside issues $2,000,000 of 6%, 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 $1,728,224.

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

For each semiannual period, complete the table below to calculate the cash payment, straight-line discount amortization and bond interest expense.

	Par (maturity) value Annual Rate Year Semiannual cash interest payment = Par (maturity) value Bonds price Discount on Bonds Payable Semiannual periods Straight-line discount amortization = = Semiannual cash payment Discount amortization Bond interest expense =

Complete this question by entering your answers in the tabs below.

Req 1

Req 2A to 2C

Req 3

Req 4

Req 5

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

	Total bond interest expense over life of bonds: Amount repaid: payments of Par value at maturity Total repaid 0 Less amount borrowed Total bond interest expense $0

Complete this question by entering your answers in the tabs below.

Req 1

Req 2A to 2C

Req 3

Req 4

Req 5

Prepare the first two years of an amortization table using the straight-line method.

	Semiannual Period-End Unamortized Discount Carrying Value 01/01/2017 06/30/2017 12/31/2017 06/30/2018 12/31/2018

Journal entry worksheet

Record the first interest payment on June 30, 2017.

Note: Enter debits before credits.

	Date General Journal Debit Credit Jun 30, 2017 Journal entry worksheet Record the second interest payment on December 31, 2017. Note: Enter debits before credits. Date General Journal Debit Credit Dec 31, 2017

Answer 1

1. January 1, 2017, journal entry to record the bonds’ issuance.

Year	Particulars	L.F	Debit ($)	Credit ($)
2017
Jan-01	Cash		1,728,224
	Unamortized Bond Discount		271,776
	Bond payable			2,000,000
	(for bond issued for 15 years)

2a. Table below to calculate the cash payment is:

Par (maturity) value	Annual Rate	Year		Semiannual cash interest payment
2,000,000	6%	6/12	=	60,000

2b. Table below to calculate the straight-line discount amortization is:

Par (maturity) value	Bonds price		Discount on Bonds Payable	Semiannual periods		Straight-line discount amortization
2,000,000	1,728,224	=	271,776	30	=	9059.2

2c. Table below to calculate the bond interest expense is:

Semiannual cash payment	Discount amortization		Bond interest expense
60,000	9059.2	=	69,059

3. Table to calculate the total bond interest expense to be recognized over the bonds' life is:

Total bond interest expense over life of bonds:
Amount repaid:
30	payments of	60,000	1,800,000
Par value at maturity			2,000,000
Total repaid			3,800,000
Less amount borrowed			1,728,224
Total bond interest expense			$ 2,071,776

4.  first two years of an amortization table using the straight-line method is:

	A	B	C	D	E
Semiannual Interest Period	Cash Interest Paid	Bond Interest Expense	Discount amortization	Discount	Carrying Value at end of period
	2,000,000*6%*6/12	A+C	271,776/30		E+C
0				$ 271,776.00	$1,728,224.00
1	$60,000	$69,059	$9,059.2	$262,717	$1,737,283
2	$60,000	$69,059	$9,059.2	$253,658	$1,746,342
3	$60,000	$69,059	$9,059.2	$244,598	$1,755,402
4	$60,000	$69,059	$9,059.2	$235,539	$1,764,461

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

Year	Particulars	L.F	Debit ($)	Credit ($)
Jun-30	Interest expense		69,059
	Unamortized Bond Discount			9,059
	Cash			60,000
	(For interest paid on 6% bonds and amortization of discount)
Dec-31	Interest expense		69,059
	Unamortized Bond Discount			9,059
	Cash			60,000
	(For interest paid on 6% bonds and amortization of discount)