Question

Check my Hillside issues $1,300,000 of 7%, 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 $1,123,346. 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. 21c) 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. aces Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A to 20 Reg 3 Reg 4 Reg 5 For each semiannual period, compute (a) the cash payment, (b) the straight-line discount amortization, and (c) the bond interest expense. 2(a) Par (maturity) value Annual Rate Year Semiannual cash Prey 1 of 5 Next > 4:51 PM rt your search

Answer 1

Answer 1.

Face Value = $1,300,000
Proceed from Issuance = $1,123,346

Discount on Bonds Payable = Face Value - Proceed from Issuance
Discount on Bonds Payable = $1,300,000 - $1,123,346
Discount on Bonds Payable = $176,654

Credit Date Jan. 01, 2019 General Journal Cash Discount on Bonds Payable Bonds Payable Debit 1,123,346 176,654 1,300,000

Answer 2-a.

Annual Coupon Rate = 7.00%

Semiannual Coupon = Par Value * Annual Rate * Year
Semiannual Coupon = $1,300,000 * 7.00% * 1/2
Semiannual Coupon = $45,500

Answer 2-b.

Semiannual Periods = 30 (15 years)

Straight-line Discount Amortization = Discount on Bonds Payable / Semiannual Periods
Straight-line Discount Amortization = $176,654 / 30
Straight-line Discount Amortization = $5,888

Answer 2-c.

Bond Interest Expense = Semiannual Cash Payment + Discount Amortization
Bond Interest Expense = $45,500 + $5,888
Bond Interest Expense = $51,388

Answer 3.

Total bond interest expense over life of bonds: Amount repaid: 30 payments of 1 45500 Par value at maturity Total repaid Less: amount borrowed Total bond interest expense 1365000 1300000 2665000 1123346 1541654

Answer 4.

Carrying Value Semiannual Period End 01/01/2019 06/30/2019 12/31/2019 06/30/2020 12/31/2020 Unamortized Discount 176654 170766 164878 158990 153102 1123346 1129234 1135122 1141010 1146898

Answer 5.

Credit Date June 30, 2019 Debit 51,388 General Journal Interest Expense Discount on Bonds Payable Cash Interest Expense Discount on Bonds Payable Cash 5,888 45,500 Dec. 31, 2019 51,388 5,888 45,500