Problem 10-2A Straight-Line: Amortization of bond discount LO P1, P2 Hillside is

Question

Problem 10-2A Straight-Line: Amortization of bond discount LO P1, P2 Hillside issues $1,100,000 of 9%, 15-year bonds dated January 1, 2015, that pay interest semiannually on June 30 and December 31. The bonds are issued at a price of $950,524 Required: 1. Prepare the January 1, 2015, journal entry to record the bonds' issuance View transaction list View journal entry worksheet No Date General Journal Debit Credit 950,524 149,476 Jan 01, 2015 Cash Discount on bonds payable Bonds payable 1,100,00 2(a)For each semiannual period, complete the table below to calculate the cash payment. Par (maturity) Annual Rate Semiannual cash interest Year value ayment $1,100,000> 9% x 6/12S 49,500

Explanation / Answer

Journal entry Date General Journal Debit Credit 1/1/2017 Cash 950,524 discount on bonds 149,476 bonds payable 1,100,000 2-a) par maturity value Annual rate / year semi annual cash payment 1,100,000 * 9% 6./12 49500 semi annual Straight line 2-b) par value bonds price Discount periods disc amortization 1,100,000 - 950,524 = 149,476 / 30 = 4983 2-c) Semi annual cash Discount bond interest expense payment amortization 49,500 + 4983 = 54,483 3) total bond interest expense over life of bonds amount repaid 30 payments of 49,500 1485000 par value ant maturity 1,100,000 total repaid 2585000 less amount borrowed 950,524 total bond interest expense. 1,634,476 (note bond interest expense may differ slightly due to rounding) 4) unamort Carrying period discount value 1/1/2017 149,476 950,524 6/30/2017 144,493 955,507 12/31/2017 139,510 960,490 6/30/2018 134,527 965,473 12/31/2018 129,544 970,456 5) Date General Journal Debit Credit 6/30/2016 interest expense 54,483 Discount on bonds payable 4,983 cash 49,500 31/12/2016 interest expense 54,483 discount on bonds payable 4,983 cash 49,500

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.