Question

Hillside issues $1,000,000 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 $1,223,995. 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 iournal entries to record the first two interest payments Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A to 2C Reg 3 Reg 4 Reg 5 Prenare the January 1, 2017. journal entry to record the bonds' issuance

Answer 1

Journal entry
Date	General Journal				Debit	Credit
1/1/2018	Cash				1,223,995
	premium on bonds					223,995
	bonds payable					1,000,000
2-a)	par maturity value			Annual rate	/	year	semi annual cash payment
	1,000,000		*	6%		6./12	30000
							semi annual		Straight line
2-b)	bond price		par value		premium		periods		premium amortization
	1,223,995	-	1,000,000	=	223,995	/	30	=	7467
2-c)	Semi annual cash			premium		bond interest expense
	payment			amortization
	30,000		-	7467	=	22,534
3)	total bond interest expense over life of bonds
	amount repaid
	30	payments of		30,000	900000
		par value ant maturity			1,000,000
	total repaid				1900000
	less amount borrowed				1,223,995
	total bond interest expense.				676,005
	(note bond interest expense may differ slightly due to rounding)
4)		unamort	Carrying
	period	premium	value
	1/1/2018	223,995	1,223,995
	06/30/18	216,529	1,216,529
	12/31/18	209,062	1,209,062
	06/30/19	201,596	1,201,596
	12/31/19	194,129	1,194,129
5)
Date	General Journal				Debit	Credit
6/30/18	interest expense				22,534
	premium on bonds payable				7,467
	cash					30,000
31/12/2018
	interest expense				22,534
	premium on bonds payable					7,467
	cash					30,000