Hillside issues $1,800,000 of 7%, 15-year bonds dated January 1, 2013, that pay
ID: 2419179 • Letter: H
Question
Hillside issues $1,800,000 of 7%, 15-year bonds dated January 1, 2013, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $1,555,401.
a) Prepare the January 1, 2013, journal entry to record the bonds’ issuance.
b) For each semiannual period, complete the table below to calculate the cash payment.
c) For each semiannual period, complete the table below to calculate the straight-line discount amortization.
d) For each semiannual period, complete the table below to calculate the bond interest expense.
e) Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.
f) Prepare the first two years of an amortization table using the straight-line method.
g) Prepare the journal entries to record the first two interest payments.
Explanation / Answer
c)$244,599/30 = $8,153
(15 years *2 (since semiannually ) = 30 years)
e) Thirty payment of 6,300*30 = $1,890,000
Plus Discount = 244,599
Total bond interest expense =$2,134,599
Same entry for dec interest
a) Cash $1,555,401 Discount on bonds 244,599 To Bonds paayble $1,800,000 b) $1,800,000 @7% *6/12 = $63,000c)$244,599/30 = $8,153
(15 years *2 (since semiannually ) = 30 years)
d)Bonds interest expense $63,000 + $8,153 = $71,153e) Thirty payment of 6,300*30 = $1,890,000
Plus Discount = 244,599
Total bond interest expense =$2,134,599
f) Date Unamortised discount Carrying value 1/1/2011 $244,599 $1,555,401 30/6/2011 236,446 1,563,554 31/12/2011 228,293 1,571,707 g) Interest expense $71,153 To Discount on bonds $8,153 To Cash 63,000Same entry for dec interest
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