Question

Legacy issues $325,000 of 5%, four-year bonds dated January 1, 2017, that pay interest semiannually on June 30 and December 31. They are issued at $292,181 and their market rate is 8% at the issue date.
  
Required:
1. Prepare the January 1, 2017, journal entry to record the bonds' issuance.
2. Complete the below table to calculate the total bond interest expense to be recognized over the bonds’ life.
3. Prepare an effective interest amortization table for the bonds’ first two years.
4. Prepare the journal entries to record the first two interest payments.

Prepare an effective interest amortization table for the bonds’ first two years.

	Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Discount Amortization Unamortized Discount Carrying Value 01/01/2017 $32,819 $292,181 06/30/2017 $8,125 $9 12/31/2017 8,125 06/30/2018 8,125 12/31/2018 8,125

Required 2

Answer 1

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Part 1
Date	Account	Debit	Credit
Jan 1 2017	Cash	$                292,181
	Discount on Bond Payable	$                  32,819
	Bonds Payable		$                        325,000
Part 2 and 3
		325000*2.5%	4%
	Semiannual Interest Period-End	Cash Interest Paid	Bond Interest Expense	Discount Amortization	Unamortized Discount	Carrying Value
	1/1/2017				$                          32,819	$         292,181
	06/30/2017	$                    8,125	$                          11,687	$                            3,562	$                          29,257	$         295,743
	12/31/2017	$                    8,125	$                          11,830	$                            3,705	$                          25,552	$         299,448
	06/30/2018	$                    8,125	$                          11,978	$                            3,853	$                          21,699	$         303,301
	12/31/2018	$                    8,125	$                          12,132	$                            4,007	$                          17,692	$         307,308
Part -4
Jun 30 2017	Interest Expense	$                    8,125
Jun 30 2017	Discount on Bond Payable	$                    3,562
Jun 30 2017	Cash		$                          11,687
	(to record interest and amortiazation)
Dec 31 2017	Interest Expense	$                    8,125
Dec 31 2017	Discount on Bond Payable	$                    3,705
Dec 31 2017	Cash		$                          11,830
	(to record interest and amortiazation)
Jun 30 2018	Interest Expense	$                    8,125
Jun 30 2018	Discount on Bond Payable	$                    3,853
Jun 30 2018	Cash		$                          11,978
	(to record interest and amortiazation)
Dec 31 2018	Interest Expense	$                    8,125
Dec 31 2018	Discount on Bond Payable	$                    4,007
Dec 31 2018	Cash		$                          12,132
	(to record interest and amortiazation)