Ellis issues 9.5%, five-year bonds dated January 1, 2017, with a $560,000 par va

Question

Ellis issues 9.5%, five-year bonds dated January 1, 2017, with a $560,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $594,066. The annual market rate is 8% on the issue date.

Required:

6 Ellis issues 9.5%, five-year bonds dated January 1, 2017, with a $560,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $594,066. The annual market rate is 8% on the issue date Required 1. Complete the below table to calculate the total bond interest expense over the bonds' life 2. Prepare a straight-line amortization table for the bonds' life 3. Prepare the journal entries to record the first two interest payments. Complete this question by entering your answers in the tabs below Required 1 Required 2Required 3 Prepare a straight-line amortization table for the bonds' life Semiannual Period End 01/01/2017 06/30/2017 12/31/2017 06/30/2018 12/31/2018 06/30/2019 12/31/2019 06/30/2020 12/31/2020 06/30/2021 12/31/2021 namortize Premium Carrying Value This is a numeric cell, so please enter numbers only

Explanation / Answer

1) Amortization Table: Semi annual period Interest Paid Interest Expense Premium Amortized Carrying Value 01/01/2017 $          5,94,066 06/30/2017              26,600                      23,193                                3,407              5,90,659 12/31/2017              26,600                      23,193                                3,407              5,87,253 06/30/2018              26,600                      23,193                                3,407              5,83,846 12/31/2018              26,600                      23,193                                3,407              5,80,440 06/30/2019              26,600                      23,193                                3,407              5,77,033 12/31/2019              26,600                      23,193                                3,407              5,73,626 06/30/2020              26,600                      23,193                                3,407              5,70,220 12/31/2020              26,600                      23,193                                3,407              5,66,813 06/30/2021              26,600                      23,193                                3,407              5,63,407 12/31/2021              26,600                      23,193                                3,407              5,60,000 Total          2,66,000                   2,31,934                              34,066 Working: Uamortized Premum = Amount received on issuance - Par Value of Bonds =                   5,94,066 -              5,60,000 =                      34,066 Premium amortization = Unamortized Discount / Semi annual life =                      34,066 / 10 =                   3,406.60 Interest Paid = Par Value x Semi annual coupon rate =                   5,60,000 x 9.5%/2 =                26,600.00 Interest Expense = Coupon Interest Paid - Bonds premium amortization =                      26,600 -                    3,407 =                      23,193 2) Semi annual period Uamortized premium Carrying Value 01/01/2017                34,066.00                    5,94,066.00 06/30/2017                   3,406.60                    5,90,659.40 12/31/2017                   3,406.60                    5,87,252.80 06/30/2018                   3,406.60                    5,83,846.20 12/31/2018                   3,406.60                    5,80,439.60 06/30/2019                   3,406.60                    5,77,033.00 12/31/2019                   3,406.60                    5,73,626.40 06/30/2020                   3,406.60                    5,70,219.80 12/31/2020                   3,406.60                    5,66,813.20 06/30/2021                   3,406.60                    5,63,406.60 12/31/2021                   3,406.60                    5,60,000.00 3) Date Account titles and explanation Debit Credit 06/30/2017 Interest Expense                        23,193.40 Premium on Bonds Payable                          3,406.60 Cash            26,600.00 (To record interest expense) 12/31/2017 Interest Expense                        23,193.40 Premium on Bonds Payable                          3,406.60 Cash            26,600.00 (To record interest expense)

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