: Chapter 10 Powerpoint . Ch.10 Problems xC On January 1, 2018, Shay x https://n

Question

: Chapter 10 Powerpoint . Ch.10 Problems xC On January 1, 2018, Shay x https://newconnect.mheducation.com/flow/connect.html lems Saved Help Save&Exit; Submit Check my work Ellis issues 90%, five-year bonds dated January 1, 2018, with a $480,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $499,466. 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 2 Required 3 Complete the below table to calculate the total bond interest expense over the bonds' life Total bond interest expense over life of bonds: Amount repaid payments of Par value at maturity Total repaid l ess amount horrnwerd Prey 16 of 21Next > arch

Explanation / Answer

1 Life of the bond is 5 years.Interest payment twice in a year.Hence,total 10 times interest payment Interest payable for a 6 month period=480000*9%*6/12=$ 21600 Total bond interest expense over life of bonds: Amount repaid: 10 Payments of $21600 216000 Par value at maturity 480000 Total repaid 696000 Less: amount borrowed 499466 Total bond interest expense 196534 2 Premium to be amortized=Issue price-Par value=499466-480000=$ 19466 Interest is paid 10 tomes over the life of the bond Hence,Premium to be amortized over 6 month period=19466/10=$1946.6 Semiannual interest period-end Unamortized Premium Premium Amortized Carriying value * 01-01-2018 19466 0 499466 06/30/2018 19466 1946.6 497519.4 12/31/2018 17519.4 1946.6 495572.8 06/30/2019 15572.8 1946.6 493626.2 12/31/2019 13626.2 1946.6 491679.6 06/30/2020 11679.6 1946.6 489733 12/31/2020 9733 1946.6 487786.4 06/30/2021 7786.4 1946.6 485839.8 12/31/2021 5839.8 1946.6 483893.2 06/30/2022 3893.2 1946.6 481946.6 12/31/2022 1946.6 1946.6 480000 Carriying value at the beginning=Issue price Carriying value for subsequent periods=Beginning balance of carriying value-Premium amortized 3 Date General Journal Debit Credit June 30,2018 Interest expense 19653.4 Premium on bonds payable 1946.6 Cash (480000*9%*6/12) 21600 (Interest paid) Dec 31,2018 Interest expense 19653.4 Premium on bonds payable 1946.6 Cash (480000*9%*6/12) 21600 (Interest paid)

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