2 Hillside issues $1,100,000 of 9%, 15-year bonds dated January 1, 2017, that pa

Question

2 Hillside issues $1,100,000 of 9%, 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 $1,346,395 5 points 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 Skipped 4. Prepare the first two years of an amortization table using the straight-line method eBook5. Prepare the journal entries to record the first two interest payments. Complete this question by entering your answers in the tabs below Ask Req 1Req 2A to 2C Req3 Req 4 Req 5 Print Prepare the January 1, 2017,journal entry to record the bonds' issuance View transaction list

Explanation / Answer

1

Prepare the January 1, 2017, journal entry to record the bonds’ issuance.

For each semiannual period, complete the table below to calculate the cash payment.

For each semiannual period, complete the table below to calculate the straight-line premium amortization.

For each semiannual period, complete the table below to calculate the bond interest expense.

Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.

Prepare the first two years of an amortization table using the straight-line method.

Prepare the journal entries to record the first two interest payments.

1

Prepare the January 1, 2017, journal entry to record the bonds’ issuance.

Date General Journal Debit Credit Jan 1, 2015 Cash 1,346,395 Premium on bonds payable 246,395 Bonds payable 1,100,000 2(a)

For each semiannual period, complete the table below to calculate the cash payment.

Par (maturity) value Annual Rate Year Semiannual cash interest
payment $1,100,000 x 9% x 6/12 = $49,500 2(b)

For each semiannual period, complete the table below to calculate the straight-line premium amortization.

Par (maturity) value Bonds price Premium on Bonds Payable Semiannual periods Straight-line premium amortization $1,100,000 - $1,346,395
= $246,395 ÷ 30 = $8,213
2(c)

For each semiannual period, complete the table below to calculate the bond interest expense.

Semiannual cash payment Premium amortization Bond interest expense $49,500 + $8,213
= $41,287 3

Complete the below table to calculate the total bond interest expense to be recognized over the bonds' life.

Total bond interest expense over life of bonds: Amount repaid: 30 payments of $49,500 $1,485,000
Par value at maturity 1,100,000 Total repaid 2585000 Less amount borrowed -1,346,395 Total bond interest expense 1,238,605 4.

Prepare the first two years of an amortization table using the straight-line method.

Semiannual Period-End Unamortized Premium Carrying Value 1/1/2017 $246,395 $1,346,395 6/30/2017 238,182 1,338,182 12/31/2017 229,969 1,329,969 6/30/2018 221,756 1,321,756 12/31/2018 213,543 1,313,543 5

Prepare the journal entries to record the first two interest payments.

Date General Journal Debit Credit Jun 30, 2017 Bond interest expense 41,287 Premium on bonds payable 8213 Cash 49,500 Dec 31, 2017 Bond interest expense 41,287 Discount on bonds payable 8213 Cash 49,500

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