Question

Hillside issues $1,500,000 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 $1,835,994. 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 premium 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.

Answer 1

Ques 1
Date	General Journal	Debit	credit
Jan-01	Cash	1835994
	Premium on bonds payable		335994
	bonds payable		1500000
Ques 2
Par value	Annual rate	Year	Semi annual cash payment
1500000	6%	6/12	45000
(b)
Bond price	Par value	premium payable	semiannual periods	SLM amortization
1835994	1500000	335994	30	11200
('c)
Semi annual cash payment	Premium amortization	Bond Interest expense
45000	11200	33800
Ques 3
Amount repaid
30	payments of	45000	1350000
Parr value at maturity			1500000
Total repaid			2850000
Less:amount borrowed			1835994
Total bond interest expense			1014006
Ques 4
Semiannual period	Unamortized premium	carrying value
Jan-01	335994	1835994
Jun-30	324794	1824794
Dec-31	313594	1813594
Jun-30	302395	1802395
Dec-31	291195	1791195
Ques 5
Date	General Journal	Debit	credit
Jun-30	Bond Interest expense	33800
	Premium on bonds payable	11200
	Cash		45000
Dec-31	Bond Interest expense	33800
	Premium on bonds payable	11200
	Cash		45000